Assume That Two Investors Each Hold a Portfolio, and That

question 74

True/False

Assume that two investors each hold a portfolio, and that portfolio is their only asset.Investor A's portfolio has a beta of minus 2.0, while Investor B's portfolio has a beta of plus 2.0.Assuming that the unsystematic risks of the stocks in the two portfolios are the same, then the two investors face the same amount of risk.However, the holders of either portfolio could lower their risks, and by exactly the same amount, by adding some "normal" stocks with beta = 1.0.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead rate incurred and the expected (or standard) rate, multiplied by the actual activity level.

Variable Overhead Rate Variance

A measure used in managerial accounting to compare the actual variable overhead incurred to the expected overhead cost based on the standard cost system.

Indirect Labor

Labor costs related to tasks that support the production environment but are not directly involved in creating the final product.

Variable Overhead Efficiency Variance

A measure used in managerial accounting to assess the efficiency of variable overhead costs incurred relative to the expected amount of those costs.