Amanda Talks with Several Different Brokers at a Social Gathering

question 121

Multiple Choice

Amanda talks with several different brokers at a social gathering. She hears the following advice from brokers A, B, and C. Which broker, if any, gave her incorrect advice?

• A)Broker A: "There are risks in holding stocks, even in a highly diversified portfolio."
• B)Broker B: "Portfolios with smaller standard deviations have lower risk."
• C)Broker C: "Stocks with greater risks offer lower average returns."
• D)They all gave her correct advice.

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Definitions:

Capacity

The maximum level of output that a company can sustain to make a product or provide a service under normal conditions.

Activity-Based System

A method in accounting that allocates costs to specific activities based on their use of resources, aimed at providing more accurate cost information.

Non-Volume-Based Costs

Costs that do not vary directly with the volume of production or sales, often encompassing fixed costs like rent or salaries.

Volume-Based Costs

Costs that vary directly with the level of production or sales volume, such as direct materials and direct labor, contrasting with fixed costs that remain constant regardless of volume.