A "Risky" Asset Will Earn a Rate of Return Close

question 17

Multiple Choice

A "risky" asset will earn a rate of return close to that of "riskless" assets if its risk is:

• A) nondiversifiable.
• B) diversifiable.
• C) nominal, as opposed to real.
• D) related to the rate of inflation.
• E) no greater than the risk of similar assets.

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Definitions:

Pounds

A unit of weight commonly used in the British imperial and United States customary systems, equivalent to 0.453592 kilograms.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard quantity expected to be used, valued at the standard cost.

Materials Price Variance

The difference between the actual cost of materials used in production and the standard cost of those materials.

Standard Costs

Predetermined costs for materials, labor, and overhead used as benchmarks against actual production costs.