Which of the Following Statements About Relevant and Irrelevant Risks

question 23

Multiple Choice

Which of the following statements about relevant and irrelevant risks is true?

• A) Relevant risk includes inflation risk, but excludes political risk.
• B) Relevant risk includes interest rate risk, but excludes default risk.
• C) Relevant risk includes liquidity risk, but excludes exchange rate risk.
• D) Relevant risk includes exchange rate risk, but excludes inflation risk.
• E) Relevant risk includes default risk, but excludes political risk.

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Definitions:

Manufacturing Cost

The total expense involved in the manufacturing of a product, including raw materials, labor, and overhead costs.

Desired Profit

The amount of financial gain a company aims to achieve from its operations, often used in setting prices and targets.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they occur.

Differential Cost

The difference in cost between two alternative decisions or changes in output levels.