The Reward-To-Risk Ratio for Stock a Is Less Than the Reward-To-Risk

question 30

Multiple Choice

The reward-to-risk ratio for stock A is less than the reward-to-risk ratio of stock B.Stock A has a beta of 0.82 and stock B has a beta of 1.29.This information implies that:

• A) stock A is riskier than stock B and both stocks are fairly priced.
• B) stock A is less risky than stock B and both stocks are fairly priced.
• C) either stock A is underpriced or stock B is overpriced or both.
• D) either stock A is overpriced or stock B is underpriced or both.
• E) both stock A and stock B are correctly priced since stock A is riskier than stock B.

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the expected (or budgeted) cost, based on predetermined rates and actual hours worked.

Variable Overhead Rate Variance

The gap between what was actually spent on variable overhead and what was predicted to be spent, considering the actual activity level.

Rate Variances

Differences between the standard or expected rates of costs and the actual rates incurred, often analyzed in cost accounting.

Variable Overhead

Refers to the costs that fluctuate with changes in production volume, such as utilities or materials that are consumed directly as a result of manufacturing activities.