Security a and Security B Have Similar Risks

question 24

Multiple Choice

Security A and Security B have similar risks.However,Security A has a higher rate of return than Security B.The return on Security A minus the return on Security B is referred to as which one of the following?

• A) market return
• B) abnormal return
• C) deviated return
• D) excess return
• E) real return

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Definitions:

Pro Forma Cash Flows

Projected cash flows based on assumptions and estimates, used for planning and financial analysis.

Required Rate of Return

The minimum annual percentage earnings necessary for an investment to be considered acceptable, taking into account its risk and the time value of money.

Financial Merger

A financial merger is a consolidation of two or more companies, primarily for financial gains, improving capital, or enhancing corporate strength through combined resources.

Columbia Pictures

A major American film studio and subsidiary of Sony Pictures, focusing on the production, marketing, and distribution of films and television content.