Returns on Systematic Risk-Free Securities (Like U

question 22

Multiple Choice

Returns on systematic risk-free securities (like U.S.Treasury securities) should exhibit what type of correlation with returns on a diversified market wide portfolio of stocks?

• A) Nearly perfect correlation
• B) Perfect correlation
• C) No correlation
• D) Unable to tell without specifics about the portfolio

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Definitions:

Equity Method

The equity method is an accounting technique used to record investments in associate companies where the investor has significant influence but does not control the company outright, typically identified by owning 20-50% of the voting stock.

Deferred Intra-entity

Pertains to transactions between entities within the same company that are not settled immediately but are recorded and settled at a later date.

Markup Over Cost

The ratio or percentage by which a product’s selling price exceeds its cost, effectively representing the gross profit margin.

Consolidated Cost Of Goods Sold

The total cost of goods that have been sold by a parent company and its subsidiaries, presented as a single figure in consolidated financial statements.