Jamie Started His Own Plumbing Business and Put £3000 in the Bank

question 7

Multiple Choice

Jamie started his own plumbing business and put £3000 in the bank account and then used £ 2 500 to buy a van. Which of the following represent the correct entries in relation to these transactions?

• A) Increase the bank account by £3000 and the van account by £ 2 500
• B) Increase the bank account by £3000 and the van account by £ 2 500 and put £5 500 in the owners' equity account
• C) Increase the bank account by £3000 and the owners' equity account by £3000 then reduce the bank account by £2 500 and increase the van account by £ 2 500
• D) Increase the bank account by £3000, the van account by £2 500 and decrease the bank account by £2 500
• E) Increase the bank account by £3000 and owners' equity account by £3000 and put the £2 500 in the van account

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Definitions:

Correlation Coefficient

A statistical measure that calculates the strength and direction of the relationship between two variables, ranging from -1 to 1.

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of data points, often used to assess the volatility of an investment.

Separation Property

The property that portfolio choice can be separated into two independent tasks: (1) determination of the optimal risky portfolio, which is a purely technical problem, and (2) the personal choice of the best mix of the risky portfolio and the risk-free asset.

Risky Portfolio

An investment portfolio that contains assets with a higher degree of risk, potentially leading to higher returns or greater losses.