Soft Capital Rationing

question 2

Multiple Choice

Soft capital rationing:

• A)is costly to shareholders
• B)Is used to determine mutually exclusive projects
• C)Should be costless to the shareholders of the firm
• D)Solves the problem of investment timing

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Definitions:

Variance

A measure of the dispersion of a random variable. Equals the expected value of the squared deviation from the mean.

Fairly-Priced Securities

Securities that are believed to be priced appropriately according to their risk level and the expected rate of return.

Positive Betas

A term referring to financial securities that have a beta greater than zero, indicating that their returns generally move in the same direction as the market.

Zero Alphas

Situations in which an investment performs exactly as expected according to its beta, showing neither added nor diminished value.