A T-Bill Pays 6 Percent Rate of Return

question 9

Multiple Choice

A T-bill pays 6 percent rate of return.Would risk-averse investors invest in a risky portfolio that pays 12 percent with a probability of 40 percent or 2 percent with a probability of 60 percent?

• A) Yes,because they are rewarded with a risk premium.
• B) No,because they are not rewarded with a risk premium.
• C) No,because the risk premium is small.
• D) Cannot be determined.
• E) None of these.

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Definitions:

Processing Department

A segment within a factory where a particular process, phase of production, or type of operation is carried out.

Work In Process

Units of product that are only partially complete and will require further work before they are ready for sale to the customer.

Total Amount

The sum total of all quantities or values, usually referring to the final sum on invoices, bills, or financial statements.

Cost Reconciliation Report

A report that reconciles estimated or budgeted costs with actual costs, commonly used in project management and job costing.