TopKnotch Mfg

question 16

Multiple Choice

TopKnotch Mfg. Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this "markup chain?"

• A) The wholesaler's markup is 25 percent.
• B) The manufacturer is taking a markup of 30 percent.
• C) The retailers' markup is 100 percent.
• D) None of these alternatives is true for this markup chain.

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Definitions:

Risk Premiums

The extra return expected by investors for taking on additional risk compared to a risk-free asset.

Systematic Risk

A risk associated with the entire market or a segment of it, which cannot be lessened by diversifying holdings.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield of government bonds.

Stock Index

A statistic that reflects the composite value of a selected group of stocks, representing their aggregate performance.