Return on Equity

question 110

Multiple Choice

Return on equity:

• A)shows the relationship between net income and net assets.
• B)is computed for both common and preferred stock.
• C)is a standard measure used to compare companies of different sizes.
• D)is computed by dividing net income plus preferred dividends by average common stockholders' equity.

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Definitions:

Correlation Coefficient

A statistic in which the covariance is scaled to a value between −1 (perfect negative correlation) and +1 (perfect positive correlation).

Minimum Variance Portfolio

A portfolio constructed to achieve the lowest possible volatility or variability in returns among a set of potential assets.

Standard Deviation

A statistical measure that quantifies the dispersion or variability of a set of data points or investment returns around their mean (average).

Two-asset Portfolio

A portfolio comprising only two assets, used to study the principles of diversification and risk-return trade-off in finance.