Bob Owns 100 Shares of ACT Corporation Common Stock with a Basis

question 34

Multiple Choice

Bob owns 100 shares of ACT Corporation common stock with a basis of $3,500 and a FMV of $12,000.Bob receives 10 stock rights as a nontaxable distribution,and no basis is allocated to the stock rights.With each stock right,Bob may acquire one share of stock for $25.Bob exercises all 10 stock rights.The total basis of the newly acquired stock is

• A)$0.
• B)$250.
• C)$350.
• D)$1,200.

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Definitions:

Required Return

The minimum expected return an investor seeks for holding a risky investment, considering both time value of money and risk factors.

Expected Return

The weighted average of all possible returns from an investment, accounting for the probability of each outcome.

Beta

An indicator of how much a stock's price fluctuates compared to the entire market, showing the level of risk associated with its returns.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of values, commonly used in finance to assess the risk associated with a particular investment.