Instruction 12-7
an Investment Specialist Claims That If One Holds

question 14

Multiple Choice

Instruction 12-7
An investment specialist claims that if one holds a portfolio that moves in opposite direction to the market index like the All Ordinaries Index,then it is possible to reduce the variability of the portfolio's return.In other words,one can create a portfolio with positive returns but less exposure to risk.A sample of 26 years of the All Ordinaries index and a portfolio consisting of stocks of private prisons,which are believed to be negatively related to the All Ordinaries index,is collected.A regression analysis was performed by regressing the returns of the prison stocks portfolio (Y) on the returns of All Ordinaries index (X) to prove that the prison stocks portfolio is negatively related to the All Ordinaries index at a 5% level of significance.The results are given in the following Microsoft Excel output.
$$\begin{array} { | l | r | r | r | r | } \hline & \text { Coefficients } & \text { Standard Error } & \text { T Stat } & { \text { P-value } } \\\hline \text { Intercept } & 4.866004258 & 0.35743609 & 13.61363441 & 8.7932 \mathrm { E } - 13 \\\hline \mathrm { S } \& \mathrm { P } & - 0.502513506 & 0.071597152 & - 7.01862425 & 2.94942 \mathrm { E } - 07 \\\hline\end{array}$$
-Referring to Instruction 12-7,to test whether the prison stocks portfolio is negatively related to the All Ordinaries index,the measured value of the test statistic is

• A)-0.503.
• B)0.072.
• C)-7.019.
• D)0.357.

Understand the financial implications of using capacity as a basis for predetermined overhead rate calculation.

Understand the concept of predetermined overhead rate based on activity at capacity.

Calculate the amount of manufacturing overhead charged to a specific job when a predetermined overhead rate is used.

Determine the cost of unused capacity and its effect on the income statement.

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Definitions:

Charging

In financial contexts, charging refers to the act of imposing a fee for goods or services; in technology, it pertains to the process of replenishing a device's battery power.

Product Line

A group of related products marketed by the same company under a single brand name.

Competitive Pricing

A pricing strategy where the price of a product or service is set in relation to the prices of competitors, aiming to provide an advantage or match market rates.