Assume That Both X and Y Are Well-Diversified Portfolios and the Risk-Free

question 10

Multiple Choice

Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%. Portfolio X has an expected return of 14% and a beta of 1. Portfolio Y has an expected return of 9.5% and a beta of .25. In this situation, you would conclude that portfolios X and Y ________.

• A) are in equilibrium
• B) offer an arbitrage opportunity
• C) are both underpriced
• D) are both fairly priced

Calculate and interpret the contribution margin and contribution margin ratio.

Understand and apply the concept of operating leverage and its impact on profitability.

Analyze and calculate the effects of changes in costs (fixed and variable) and sales volume on profit.

Explain the significance of fixed, variable, and mixed costs in decision-making.

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Definitions:

Behavioral Sequence

A series of actions or behaviors that occur in a particular order or pattern.

Negative Reinforcement

A behavioral principle where the removal of an adverse stimulus strengthens or increases the probability of a behavior.

Time-out

A behavioral correction method that involves temporary isolation or removal from a stimulating environment to decrease undesirable behaviors.

Appropriate Behavior

A set of actions or conduct that is considered correct or suitable in a given context.