Which of the Following Statements Is Most Correct

question 2

Multiple Choice

Which of the following statements is most correct?

• A) If investors become more risk averse,but r_RF remains constant,the required rate of return on high beta stocks will rise,the required return on low beta stocks will decline,but the required return on an average risk stock will not change.
• B) If Mutual Fund A held equal amounts of 100 stocks,each of which had a beta of 1.0,and Mutual Fund B held equal amounts of 10 stocks with betas of 1.0,then the two mutual funds would both have betas of 1.0 and thus would be equally risky from an investor's standpoint.
• C) An investor who holds just one stock will be exposed to more risk than an investor who holds a portfolio of stocks,assuming the stocks are all equally risky.Since the holder of the 1-stock portfolio is exposed to more risk,he or she can expect to earn a higher rate of return to compensate for the greater risk.
• D) Assume that the required rate of return on the market,r_M,is given and fixed.If the yield curve were upward-sloping,then the Security Market Line (SML)would have a steeper slope if 1-year Treasury securities were used as the risk-free rate than if 30-year Treasury bonds were used for r_RF.
• E) Statements a,b,c,and d are all false.

Understand the valuation allowance and its impact on income tax expense.

Understand the rationale and requirements for disclosing details related to deferred tax assets and liabilities.

Comprehend the concept of interperiod tax allocation and its impact on matching revenues with expenses.

Analyze the effects of future income tax rate changes on net income.

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The condition of being physiologically dependent on nicotine, characterized by an uncontrollable urge to consume nicotine through smoking or other means.

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The act of smoking tobacco or other substances, not out of addiction, but for enjoyment or relaxation.

Deadliest Behavior

Actions or habits that significantly increase the risk of mortality, such as smoking or reckless driving.

Cigarette Smoking

The act of inhaling and exhaling the smoke of tobacco or a drug.