Selling Short an Investment with a Low Expected Return and Using

question 12

Multiple Choice

Selling short an investment with a low expected return and using the proceeds to increase a position in an investment with a higher expected return results in a larger expected return than can be achieved by investing only in the investment with the high expected return.This is known as:

• A)passive trading.
• B)scalping.
• C)diversifying an investment.
• D)leveraging an investment.

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Definitions:

Market Share

The percentage of an industry's sales that a particular company controls.

Herfindahl-Hirschman Index

A measure of market concentration used to determine the level of competition within an industry, calculated by summing the squares of the market shares of all firms in the market.

Marginal Revenue

The additional income that is gained from selling one more unit of a good or service, crucial for businesses when deciding how much to produce.

Total Cost

The complete cost of production that includes both fixed and variable costs incurred in creating goods or services.