Security a Has a Beta of

question 52

Multiple Choice

Security A has a beta of .99, security B has a beta of 1.2, and security C has a beta of -1.0. This information indicates that

• A) security A has the highest degree of market risk.
• B) security B has 20% more systematic risk than the market.
• C) security C has the highest degree of market risk.
• D) security C would be the best investment if a strong bull market is expected.

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Definitions:

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the costs necessary to convert raw materials into finished goods.

Process Costing

An accounting methodology used for homogeneous products, where costs are averaged over the units produced.

Weighted-Average Method

A cost flow assumption used in inventory valuation and cost accounting, where costs are averaged over the units available for sale.

Equivalent Unit

A concept used in cost accounting to express the amount of work done on in-process products in terms of fully completed units.