Mary Talked to Several Stockbrokers and Made the Following Conclusions

question 330

Multiple Choice

Mary talked to several stockbrokers and made the following conclusions. Which, if any, of her conclusions are correct?

• A)It is relatively easy to reduce firm-specific risk by increasing the number of companies one holds stock in.
• B)Stock prices, even if not exactly a random walk, are very close to it.
• C)Some people have made a lot of money in the stock market by using insider information, but these cases are not contrary to the efficient markets hypothesis.
• D)All of Mary's conclusions are correct.

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Definitions:

Machine-hours

A measure of the time that machines are operating, often used as a basis for allocating manufacturing overhead costs.

Direct Materials Cost

The cost of raw materials and components that are directly used in the production of a product.

Direct Labor-hours

Direct labor-hours are the total time workers spend on producing a particular unit of goods or services.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production based on a certain activity base, such as labor hours or machine hours.