What Diversification Benefit Argument Is Countered with Lamont's Study Indicating

question 10

Multiple Choice

What diversification benefit argument is countered with Lamont's study indicating that oil firm investments in their nonoil subsidiaries fell sharply after oil price drops in the 1980s?

• A)Use of internal capital markets
• B)Economies of scale and scope
• C)Economizing on transaction costs
• D)Diversifying shareholder portfolios
• E)Identifying undervalued firms

---

Definitions:

Monetary Liabilities

Obligations of an entity to pay cash to another party in the future as a result of past transactions or events.

Exchange Rate

The ratio of exchange between two currencies.

Exchange Rates

The rate at which one currency can be exchanged for another, which can fluctuate due to market forces.

Functional Currency

The money type utilized in the financial statements of a business, which is from the main economic setting where the business functions.