David Recently Received an Inheritance, and He Is Planning to Invest

question 167

Multiple Choice

David recently received an inheritance, and he is planning to invest the inheritance in one of four stock portfolios. Which of these portfolios would you expect to have the lowest risk?​

• A)​A portfolio with an average annual rate of return of 5%.
• B)​​A portfolio with an average annual rate of return of 8%.
• C)​​A portfolio with an average annual rate of return of 10%.
• D)​​A portfolio with an average annual rate of return of 14%.

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Definitions:

Favorable

A term used in budgeting and accounting to describe a financial result or variance that is better than expected or budgeted.

Flexible Budget

A budget that adjusts or scales according to changes in the volume of activity, revenue, or other factors.

Sales Variance

The difference between actual sales and budgeted or forecasted sales, analyzed to understand revenue performance.

Flexible Budget Sales

Sales projections within a flexible budget that adjust based on actual levels of activity, rather than being fixed.