A Firm Will Likely Benefit Most from Diversifying If

question 39

Multiple Choice

A firm will likely benefit most from diversifying if:

• A) the correlations between country economies are high.
• B) the correlations between country economies are low.
• C) the variability of all country economy levels is high.
• D) B and C

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Definitions:

Additional Paid-in Capital

The amount of money investors have paid for shares above their nominal value during the issuance of stock.

Voting Shares

Shares of a company that grant the shareholder the right to vote on company matters, such as electing the board of directors.

Fair Value

A projected cost at which property or obligation can be swapped among aware, agreeable individuals in a transaction without any undue pressure.

Stock Issuance Costs

Expenses associated with the issuance of new shares of stock, such as legal, accounting, and underwriting fees.