Receiving a Stock Dividend from an Available-For-Sale Investment Requires the Following

question 44

Multiple Choice

Receiving a stock dividend from an available-for-sale investment requires the following journal entry:

• A) a debit to Cash and a credit to Dividend Revenue.
• B) a debit to Cash and a credit to Unrealized Gain on Investments.
• C) a debit to Unrealized Gain on Investment and a credit to Dividend Revenue.
• D) no journal entry. Investor makes a memorandum entry in the accounting records.

Comprehend the assumptions and limitations of the Capital Asset Pricing Model (CAPM).

Interpret beta values and their indication of a security's systematic risk level.

Understand the effects of portfolio diversification on risk.

Identify the impact of inflation and changes in risk aversion on the SML.

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Definitions:

Underlying Stock Price

The current market price of the stock that is the subject of an option or other derivative investment vehicle.

January 20 Call

An options contract giving the holder the right to buy a specific asset at a predetermined price on or before January 20th.

T-Bill Rate

The yield or interest rate paid to investors in U.S. Treasury bills, which are short-term government securities.

Call Option

A financial agreement allowing the purchaser the option, rather than the requirement, to purchase a given stock, bond, commodity, or different asset at an agreed-upon price within a certain timeframe.