Chopper Company Owns 10% Interest in the Stock of Elton

question 74

Multiple Choice

Chopper Company owns 10% interest in the stock of Elton Corporation. During the year, Elton pays $10,000 in dividends to Chopper, and reports $400,000 in net income. Chopper Company's investment in Elton will increase Chopper net income by

• A) $10,000.
• B) $30,000.
• C) $40,000.
• D) $1,000.

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Definitions:

Efficient-Market Hypothesis

A theory that suggests that financial markets fully absorb and reflect all available information, making it impossible to consistently achieve higher returns than the market average.

Small Investor

An individual investor who makes relatively small amounts of investments in the stock market or other financial markets, often with limited resources.

Mutual Funds

Mutual funds are investment vehicles comprised of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.

Abnormal Return

A term in finance that refers to the difference between an actual investment return and the expected return, based on the asset's risk and market movements.