What Type of Relationship Has Formed When the Parties Have

question 2

Multiple Choice

What type of relationship has formed when the parties have agreed that one person will have power to bind the other person in contract?

• A) Principal-agent
• B) Employer-employee
• C) Employer-independent contractor
• D) Employer-agent
• E) Principal-independent contractor

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Definitions:

Risk-Free Rate

The interest rate that can be earned with certainty, commonly taken to be the rate on short-term Treasury bills.

Security Market Line

A graphical representation that shows the relationship between the expected return of an investment and its risk as measured by beta.

Expected Rate

The anticipated rate of return on an investment, factoring in known variables and risk assessments.

Capital Market Line

A line in the risk-return space representing the risk-return combination available to investors from a risk-free asset and market portfolio of risky assets.