Which of the Following Is True of a Cutoff Rate

question 11

Multiple Choice

Which of the following is true of a cutoff rate?

• A) The cutoff rate is be determined by dividing the Beta with the difference between average return and return on the riskfree rate of the securities.
• B) All securities whose return is above the cutoff rate are selected in the market portfolio.
• C) The cutoff rate is computed from the characteristics of all securities in the optimum portfolio.
• D) All securities whose risk is below the cutoff rate are selected in the optimum portfolio.

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Definitions:

Hindu

Relating to Hinduism, a major world religion originating on the Indian subcontinent and comprising various philosophies, beliefs, and rituals.

Polytheistic Religion

A belief system that recognizes the existence of many gods or deities, each with distinct attributes and areas of influence.

Moral Obligation

A duty which one owes, and which he ought to perform, but which he is not legally bound to fulfill.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.