Use the Figure for the Question(s)below

question 76

Multiple Choice

Use the figure for the question(s) below.Consider the following graph of the security market line:
-Which of the following statements regarding portfolio "B" is/are correct? 1.Portfolio "B" has a positive alpha.
2.Portfolio "B" is overpriced.
3.Portfolio "B" is less risky than the market portfolio.
4.Portfolio "B" should not exist if the market portfolio is efficient.

• A)2 and 4
• B)4 only
• C)1,3,and 4
• D)1 and 4

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Definitions:

Pre-acquisition Retained Earnings

The accumulated profits of a company before it was acquired by another entity, which are not included in the calculation of goodwill.

Consolidation Worksheet

A document used in preparing consolidated financial statements that combines the financial data of parent and subsidiary companies.

Revalued Above Cost

When an asset's market value increases beyond its historical cost, leading to an adjustment in the book value.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its identifiable net assets.