In a Portfolio,risk Is Evaluated in a Different Way Than

question 59

Multiple Choice

In a portfolio,risk is evaluated in a different way than with an individual project.In evaluating portfolio risk we:

• A) don't need to consider the impact of a given project on the overall risk of the firm.
• B) recognize that a risky investment will not create a portfolio with less risk.
• C) consider the risk of the project with the highest beta only.
• D) need to consider how the returns of the projects in the portfolio are correlated.

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Definitions:

Materials Costs

Represents the expense incurred from acquiring raw materials used in the production of goods or services.

Process Costing

A costing method used in manufacturing, where costs are allocated to batches or processes, suitable for homogeneous products.

Weighted-Average Method

A method of inventory costing that assigns the average cost of goods available for sale to both ending inventory and cost of goods sold.

First-In, First-Out Method

An inventory valuation method where goods purchased or produced first are sold or used first, often used in the accounting of inventory costs.