All Else Equal, a More Liquid Equity Will Have a Lower

question 35

Multiple Choice

All else equal, a more liquid equity will have a lower ________.

• A)beta
• B)market premium
• C)cost of capital
• D)Both A and B.
• E)Both A and C.

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Definitions:

Accounting Profits

The net income a company reports on its financial statements, calculated as total revenues minus explicit costs and depreciation.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating a gain beyond the normal profit levels expected in a competitive market.

Negative Profits

Occurs when a company's expenses exceed its revenues, resulting in financial loss.

Hidden Cost Fallacy

A misconception in decision-making that overlooks indirect or non-obvious costs associated with a choice or action.