If the Simple CAPM Is Valid and All Portfolios Are

question 46

Multiple Choice

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below are possible?
Consider each situation independently and assume the risk-free rate is 5%.

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Direct Write-off Method

An accounting method where bad debts or uncollectible accounts receivable are directly written off against income at the time they are deemed uncollectible.

Bad Debt Expense

The cost associated with accounts receivable that a company is unable to collect, considered as an expense on the income statement.

Accounts Receivable Turnover Ratio

A financial metric that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by average accounts receivable.

Gross Sales

The total sales revenue of a business before any deductions are made for returns, allowances, or discounts.