Which Kind of Risk Affects the Opportunity Cost of Capital

question 87

Multiple Choice

Which kind of risk affects the opportunity cost of capital?

• A) Nondiversifiable risk
• B) Diversifiable risk
• C) Both nondiversifiable and diversifiable risk
• D) The risk inherent in "riskless" assets such as U.S. Treasury bills
• E) The risk inherent in "riskless" portfolios such as broad stock market holdings

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing a product, such as utilities, maintenance, and factory management salaries.

T-Accounts

Diagrammatic representations used in accounting to visualize debits and credits for individual accounts.

Direct Labor-Hours

A measure of the total hours of work directly involved in manufacturing goods or providing services.

Predetermined Overhead Rate

This is a calculated figure used to allocate manufacturing overhead costs to products based on a relevant activity such as machine hours or labor hours, set before the accounting period starts.