You Are Comparing Three Securities and Discover They All Have

question 35

Multiple Choice

You are comparing three securities and discover they all have identical Treynor ratios. Given this information, which one of the following must be true regarding these three securities?

• A)They have identical betas.
• B)They have the same rates of return.
• C)They earn identical rewards per unit of total risk.
• D)They earn identical rewards per unit of systematic risk.
• E)They have identical Sharpe ratios also.

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Definitions:

First-In-First-Out (FIFO)

An inventory valuation method where the cost of goods sold is based on the cost of the earliest purchased materials, while the cost of ending inventory is based on the cost of the latest purchased materials.

Equivalent Unit

An equivalent unit is a measure used in cost accounting to represent completed units of production in a period, which takes into account both fully completed and partially completed goods.

Conversion Cost

The combined cost of direct labour and manufacturing overhead required to convert raw materials into finished goods.

Direct Labour

Employees who play a fundamental role in the assembly or creation of a company's products, contributing directly to the output.