A Change in Accounting Principle Requires That the Cumulative Effect

question 38

Multiple Choice

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to

• A) beginning retained earnings for the earliest period presented.
• B) net income for the period in which the change occurred.
• C) comprehensive income for the earliest period presented.
• D) stockholders' equity for the period in which the change occurred.

Analyze the difference in expected returns between the single factor model and the Fama-French Three Factor Model.

Calculate the expected return of a well-diversified portfolio using both single and multifactor models.

Evaluate the impact of systematic risk factors on asset returns in the context of both one-factor and multifactor models.

Differentiate between the roles of firm-specific risk and market-wide risk in asset pricing models.

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Definitions:

Tenancy by the Entireties

A form of joint property ownership typically reserved for married couples, where each owns an undivided whole of the property.

Right of Way

The legal right, established by usage or granted by authority, to pass along a specific route through grounds or property owned by another.

Power Line

Electrical transmission and distribution cables that carry electricity from power plants to end users.

Recognizable Interest

An interest in property or a transaction that is legally identifiable and protectable.