Systematic Risk Is Rewarded with a Premium in the Market

question 109

Multiple Choice

Systematic risk is rewarded with a premium in the market because:

• A)it is associated with market movements which cannot be eliminated through diversification
• B)it is a microeconomic risk
• C)that risk is unique to a firm or an industry
• D)none of the above

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Definitions:

Sales Commissions

Payments made to sales employees or agents based on the sales volume they achieve.

Factory Overhead

Factory overhead encompasses all indirect costs associated with the manufacturing process, including utilities, maintenance, and management salaries.

Amortization

The periodic transfer of the cost of an intangible asset to expense or of a bond discount to interest expense.

Prime Cost

The direct costs of manufacturing a product, which include the raw materials and direct labor expenses.