Fred and Martha Are in Their Seventies and Retired

question 17

Multiple Choice

Fred and Martha are in their seventies and retired. Which one of the following sets of portfolio statistics might best suit their situation if their primary investment goal is current income with limited risk?

• A) beta of 0.83 and a dividend yield of 6.3%
• B) beta of 0.86, and a dividend yield of 4.6%
• C) beta of 1.6 and a dividend yield of 6.4%
• D) beta of 1.1 and a dividend yield of 5.4%

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Definitions:

Negative Goodwill

Occurs when the purchase price of a company is less than the fair value of its net assets, often reflecting a bargain purchase.

Acquisition Method

An accounting approach used to consolidate the financial statements of two companies when one acquires control over the other.

Unrealized Gain

An increase in the value of an asset that has not been sold, reflecting a potential profit that is not yet realized.

Gain on Acquisition

The positive difference between the value acquired and the purchase price paid in a business combination.