Which of the Following Is True

question 2

Multiple Choice

Which of the following is true?

• A) Risky assets on average do not earn a risk premium.
• B) There is a reward for bearing risk, on average.
• C) On average, the greater the risk, the lower the reward.
• D) When comparing the common stock of two firms, the riskier one will have the lower price.
• E) If a market is not efficient, then all assets in that market will have the same reward to risk ratio.

---

Definitions:

Statement of Cash Flows

A financial report that details the inflows and outflows of cash within a company over a specific period.

Governmental Fund Types

Types of funds used by governmental entities to account for their financial resources, including general, special revenue, debt service, capital projects, and permanent funds.

Modified Approach

Modified Approach is a method in governmental accounting allowing certain assets to be reported at historical cost, exempt from the regular depreciation accounting if they are maintained at predefined condition levels.

Infrastructure Assets

Long-term physical assets that are critical for providing public services, including roads, bridges, and water supply systems.