Without a Risk-Free Asset in the Hypothetical Portfolio, the M²

question 93

Multiple Choice

Without a risk-free asset in the hypothetical portfolio, the M² equals to

• A) +1.
• B) -1.
• C) Positive infinity.
• D) Negative infinity.
• E) 0.

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Definitions:

Cash Consideration

Payment made in cash during a transaction, as opposed to stock exchange or other non-cash assets.

Amortised Cost

A financial valuation technique that gradually writes off the initial cost of an asset over a period, or the method of allocating the cost of an intangible asset over its useful life.

Effective Interest Rate

The rate that discounts the estimated future cash payments or receipts through the expected life of the financial liability or asset or, when appropriate, a shorter period to the net carrying amount of the financial asset.

Reclassification Date

The specific date on which financial assets are reclassified between different categories, affecting how they are measured and recognized.