Which one of the following must be equal for two individual securities with differing betas if those securities are correctly priced according to the capital asset pricing model?
A. reward-to-risk ratio
B. beta
C. standard deviation
D. rate of return
E. risk premium
Answer: A
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The calculation for annual depreciation using the straight-line depreciation method is
a. Initial cost / Estimated useful life b. Initial cost × Estimated useful life c. Depreciable cost × Estimated useful life d. Depreciable cost / Estimated useful life
Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare the operating activities section?
A) Cash proceeds from the sale of the equipment would be reported as a cash inflow in the investing activities section. B) The cash paid to purchase equipment would be reported as a cash outflow in the investing activities section. C) Depreciation expense would be added to net income in the operating activities section. D) A loss on the sale of the equipment would be subtracted from net income in the operating activities section.
Bryan Manufacturing had sales of $4,000,000 and net operating income of $700,000. Operating assets during the year averaged $600,000. The manager of Bryan is considering the purchase of a new machine which is expected to increase average operating assets by 8%. If the new machine is purchased, the company's new return on investment (ROI) would be:
A) 126.0% B) 16.2% C) 108.0% D) 92.6%
Several transfer pricing policies are used in practice. These transfer pricing policies include:
A) transfer at market price. B) transfer at negotiated price. C) transfer at cost. D) all of these policies.