The Relationship Between Risk and Return for Individual Securities Becomes

question 56

Multiple Choice

The relationship between risk and return for individual securities becomes evident only when we measure ________.

• A) market return rather than total return
• B) market risk rather than total risk
• C) expected return rather than required return
• D) risk level rather than return

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Definitions:

Earnings and Profits

A measure used by the IRS to determine a corporation’s ability to pay dividends to its shareholders.

Stockholder Basis

The total amount invested in a company by shareholders, including the purchase price of shares, which is used to determine capital gains or losses for tax purposes.

Capital

Financial assets or resources that businesses or individuals use to fund operations, investments, and growth.

Ordinary Business Income

Income earned from the normal business operations, subject to regular tax rates.