answer 12 + 13

12. Which of the following is a problem of historical risk premium? I. It is highly sensitive to sample period. II. Its standard error is high. III. It is sensitive to the choice between geometric and arithmetic averages. A. I & II B. II & III C. I, II & III. 13. What are the advantages of bottom-up beta over historical (regression) beta? 1. The standard error is significantly lower. II. Can be adjusted to reflect changes in the firm's business mix. III. Can be adjusted to reflect changes in the firm's financial leverage. Can be applied to private company valuation. IV. A. I & III B. I, II, III & IV. C. 1, III & IV