Your Friend Scotty Informs You That He Received a "Tax-Free

question 66

Multiple Choice

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2015 of some medical expenses he paid in 2014.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

• A)Scotty itemized deductions in 2014.
• B)Scotty did not itemize deductions in 2014.
• C)Scotty itemized deductions in 2015.
• D)Scotty did not itemize deductions in 2015.
• E)Scotty itemized deductions in 2015 but not in 2014.

---

Definitions:

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and can finance its operations.

Risk-Free Rate

The return on an investment with zero risk, typically associated with government bonds.

Market Risk Premium

The Market Risk Premium is the additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Beta

Beta measures the volatility of an investment relative to the market as a whole, indicating how much an investment's price is likely to move in relation to market changes.