According to the Following Information, Which of the Stocks Would

question 35

Multiple Choice

According to the following information, which of the stocks would be considered riskiest in a diversified portfolio of investments? $$\begin{array} { l c c } \underline{\text { Stock }} &\underline{?} &\underline{ ?}\\ \text { ABC } & 12.5 \% & 1.0 \\\text { FGH } & 8.0 \% & 0.5 \\\mathrm { MNO } & 20.2 \% & 2.4 \\\mathrm { TUV } & 15.3\% & 30\end{array}$$

• A)Stock MNO, because it has the highest standard deviation.
• B)Stock TUV, because it has the highest beta.
• C)Stock FGH, because it has the highest s/b ratio
• D)Stock ABC, because its beta is the same as the market beta (1.0) and the market is always very, very risky.

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Definitions:

Operating Lease

A leasing agreement allowing the lessee to use an asset temporarily without transferring the risks and rewards of ownership.

Sales-Type Lease

A leasing arrangement where the lessor recognizes immediate profit on the leased asset as in a sale, based on the difference between the fair value of the leased asset and its cost or carrying amount.

Direct-Financing Lease

A lease agreement where the lessor effectively finances the asset for the lessee, recognizing interest revenue over the lease term.

Credit-Approved Customers

Individuals or entities that have been evaluated and deemed creditworthy by a lender, allowing them to receive goods or services in advance of payment.