Consider These Two Investment Strategies: Strategy __________ Is the Dominant

question 32

Multiple Choice

Consider these two investment strategies: Strategy __________ is the dominant strategy because __________.

• A)1; it is riskless
• B)1; it has the highest reward/risk ratio
• C)2; its return is at least equal to Strategy 1 and sometimes greater
• D)2; it has the highest reward/risk ratio
• E)Both strategies are equally preferred.

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Definitions:

Preemptive Rights

Rights given to existing shareholders to purchase additional shares in a company during a new issue before the shares are offered to the public, allowing shareholders to maintain their proportional ownership.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, making them partial owners of that company.

Book Building

A process by which an underwriter attempts to determine the price at which an initial public offering will be offered.

Investor Demand

The interest and willingness of investors to purchase securities, significantly influencing market prices and interest rates.