Using the S&P 500 Portfolio as a Proxy of the Market

question 42

Multiple Choice

Using the S&P 500 portfolio as a proxy of the market portfolio

• A)is appropriate because U.S.securities represent more than 60% of world equities.
• B)is appropriate because most U.S.investors are primarily interested in U.S.securities.
• C)is appropriate because most U.S.and non-U.S.investors are primarily interested in U.S.securities.
• D)is inappropriate because U.S.securities make up less than 41% of world equities.

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Definitions:

Predetermined Overhead Rate

An estimated overhead rate used to assign expected overhead costs to individual units of production, aiding in budgeting and cost control.

Fixed Manufacturing Expenses

Costs that do not vary with the level of production, such as rent, salaries, and equipment depreciation.

Selling and Administrative Expenses

Expenses related to the sale of products or services and the general administration of a business, excluding production costs.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remain constant regardless of the level of production, such as depreciation on factory equipment or salaries of factory supervisors.