Which of the Following Statements Is Correct

question 97

Multiple Choice

Which of the following statements is correct?

• A) Risk aversion implies that some securities will go unpurchased in the market even if a large risk premium is paid to investors.
• B) When investors require higher rates of return for investments that demonstrate higher variability of returns,this is evidence of risk aversion.
• C) Risk aversion implies a general dislike for risk,thus,the lower the expected return the higher the risk premium.
• D) In comparing two firms that differ from each other only with respect to risk,the expected returns on the stock of the firms should be equal.
• E) None of the above statements is correct.

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Definitions:

Accrued

Expenses or revenues that have been incurred but not yet recorded in the company's accounts during the accounting period.

Pro-Rated Basis

The allocation of amounts or costs in proportion to some factor, such as time or usage.

Special Purpose Government

A form of government created for a specific, targeted purpose or project, often with a narrow scope of responsibilities compared to general-purpose local governments.

Legally Independent

A condition where an organization or individual functions autonomously, having distinct legal rights and obligations, without being controlled by or accountable to another entity.