Why Is It Important to Control Extraneous Variables (To the Best

question 59

Multiple Choice

Why is it important to control extraneous variables (to the best extent possible) ?

• A) An uncontrolled extraneous variable (variable "X") can cause doubt as to whether changes in one variable (variable "A") cause changes in another variable (variable "B")
• B) An uncontrolled extraneous variable (variable "X") can act as an alternative explanation for the claim that changes in one variable (variable "A") cause changes in another variable (variable "B")
• C) Uncontrolled extraneous variables rarely have an impact on empirical research and therefore it is not important to carefully control them most of the time
• D) Both a and b are correct

Interpret the Capital Asset Pricing Model (CAPM) and its implications for investment valuation.

Distinguish between systematic risk, unsystematic risk, total risk, and their relevance to portfolio management.

Calculate and interpret the expected return on assets and portfolios under various economic states.

Understand the role of the risk-free rate and market rate of return in determining asset pricing.

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Definitions:

Adjusted Trial Balance

A list of all accounts and their balances after adjusting entries have been made, used to check the equality of debits and credits and prepare financial statements.

Revenue Accounts

Accounts in financial accounting that represent the income generated by a company from its operational activities.

Expense Accounts

These are ledger accounts that track the costs incurred by a company in the course of doing business, excluding capital expenditures.

Adjusting Entries

Journal entries made at the end of an accounting period to update income and expense accounts and ensure compliance with the accrual method of accounting.