Which of the Following Statements Is CORRECT

question 122

Multiple Choice

Which of the following statements is CORRECT?

• A) portfolio diversification reduces the variability of returns on an individual stock.
• B) risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihood of unfavorable events.
• C) the sml relates a stock's required return to its market risk. the slope and intercept of this line cannot be controlled by the firms' managers, but managers can influence their firms' positions on the line by such actions as changing the firm's capital structure or the type of assets it employs.
• D) a stock with a beta of -1.0 has zero market risk if held in a 1-stock portfolio.
• E) when diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

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Definitions:

Direct Labor Costs

Expenses associated with employees who are directly involved in the production of goods or services.

Actual Hours

Refers to the real amount of time spent on a task or activity, as recorded or reported.

Variable Overhead Efficiency Variance

The difference between actual variable overhead based on the standard hours allowed for the actual output and the actual variable overhead incurred.

Standard Machine-Hours

An accounting measure used to allocate manufacturing overhead costs to products based on the number of hours machines are expected to operate.