Which of the Following Is True

question 51

Multiple Choice

Which of the following is true?

• A)Management buying another business at a premium may be an example of an agency cost.
• B)Corporations are not vulnerable to agency costs.
• C)Stock options are an example of an agency cost.
• D)Agency costs do not include expenses of monitoring and controlling the actions of management.

---

Definitions:

Jensen Measure

A performance metric used to evaluate the excess return of an investment portfolio over the predicted return of a risk-adjusted model.

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted by its total market value.

Sharpe Measure

A method used to evaluate the risk-adjusted return of an investment, comparing the excess return (over a risk-free rate) to the standard deviation of returns.

S&P 500 Index

A stock market index in the United States composed of the market values of 500 major companies listed on either the New York Stock Exchange or NASDAQ.