Two Risky Assets Can Be Combined to Lower the Overall

question 20

Multiple Choice

Two risky assets can be combined to lower the overall risk of a portfolio.This principle is commonly referred to as

• A)blending
• B)asset allocation
• C)diversification
• D)portfolio segmentation
• E)none of the above

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a certain activity base.

Direct Materials

Raw materials that are traceable directly to the finished product in the manufacturing process.

Manufacturing Overhead

Costs related to the manufacturing process that are not directly tied to the product being made, such as the cost of maintaining factory equipment.

Utility Costs

Expenses generated from the consumption of utilities such as electricity, water, and gas.