You Are Thinking of Adding One of Two Investments to an Already

question 112

Multiple Choice

You are thinking of adding one of two investments to an already well- diversified portfolio. If you are a risk-averse investor,which one is the better choice?

• A)Security A
• B)Security B
• C)Either security would be acceptable because they have the same beta.
• D)Security B,but only if Security B's required return is greater than 12%

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Definitions:

Total Revenue

The total income generated by a company from the sale of goods or services before any expenses are subtracted.

Economies of Scale

Cost advantages that enterprises obtain due to the scale of their operations, leading to a reduction in average costs per unit as output increases.

Decreasing Marginal Product

A principle where each additional unit of input results in a smaller increase in output, after a certain point, indicating declining efficiency.

Total Cost Curve

A graphical representation that illustrates how the total cost of producing a good changes in relation to the quantity produced, considering both fixed and variable costs.