Financial Management - Study Mode

[#1156] In an individual stock, relevant risk is classified as
Correct Answer

(B) beta coefficient

Explanation

Solution: In an individual stock, relevant risk is classified as beta coefficient. A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market.

[#1157] Type of premium asked by investors for bearing risk on average stock is classified as
Correct Answer

(B) market risk premium

Explanation

Solution: Type of premium asked by investors for bearing risk on average stock is classified as market risk premium. The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM).

[#1158] Which of the following is not a motive to hold cash?
Correct Answer

(C) Capital Investment

[#1159] If a company sells its receivable to another party to raise funds, it is known as:
Correct Answer

(B) Factoring

[#1160] The Transaction Motive for holding cash is for:
Correct Answer

(B) Daily Operations