The Test for Determining Whether or Not a Gratuitous Agent

question 15

Multiple Choice

The test for determining whether or not a gratuitous agent has breached their duty of care to the principal is:

• A)a subjective test which entails consideration of what the agent thought was reasonable action in the circumstances.
• B)a subjective test which entails consideration of the degree of care a professional of reasonable skill and competence would exercise.
• C)an objective test which entails consideration of the degree of care that the agent ordinarily uses in attending to their own affairs.
• D)an objective test which entails consideration of the degree of care a reasonable person would exercise.

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Definitions:

Traditional IRA

A Traditional IRA is a type of retirement account that allows individuals to direct pre-tax income toward investments that can grow tax-deferred until withdrawals begin at retirement age.

Deferred Annuity

A financial product that offers a stream of payments to the holder, typically starting at a future date, after an initial investment period.

Active Portfolio

In the context of the Treynor-Black model, the portfolio formed by mixing analyzed stocks of perceived nonzero alpha values. This portfolio is ultimately mixed with the passive market-index portfolio.

Nonsystematic Variance

The portion of an investment's variance that is attributable to the investment's specific factors, as opposed to the overall market movement.