The Difference Between a Profit Center and an Investment Center

question 139

Multiple Choice

The difference between a profit center and an investment center is

• A)an investment center incurs costs,but does not directly generate revenues.
• B)an investment center incurs no costs but does generate revenues.
• C)an investment center is responsible for investments made in operating assets.
• D)an investment center provides services to profit centers.
• E)There is no difference;investment center and profit center are synonymous.

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Definitions:

Portfolio AB

A diversified collection of investments of varying types held by an individual or institution.

Market Risk Premium

The additional return expected by investors for accepting the higher risk associated with the equity market over a risk-free asset.

Risk-Free Rate

The risk-free rate is the theoretical rate of return of an investment with zero risk, often represented by the yield of a short-term government bond.

Beta

A measure of a stock's volatility in relation to the overall market, used in the Capital Asset Pricing Model to determine the expected return of an investment.