Financial Management - Study Mode
[#396] Unsystematic risk is______.
Correct Answer
(B) reduced through diversification
Explanation
Solution: Unsystematic risk is reduced through diversification. Unsystematic risk is the risk that is inherent in a specific company or industry. By investing in a range of companies and industries, unsystematic risk can be drastically reduced through diversification.
[#397] The method of raising equity capital from existing members by offering securities on pro rata basis is referred to as __________.
Correct Answer
(B) Right Issue
Explanation
Solution: The method of raising equity capital from existing members by offering securities on pro rata basis is referred to as Right Issue. A rights issue is an invitation to existing shareholders to purchase additional new shares in the company.
[#398] The expected return on an investment in stock is___________.
Correct Answer
(C) the sum of expected dividends and capital gains
Explanation
Solution: The expected return on an investment in stock is the sum of expected dividends and capital gains. The expected return on an investment is the expected value of the probability distribution of possible returns it can provide to investors.
[#399] Which of the following is not a source of long-term finance?
Correct Answer
(C) Commercial papers
Explanation
Solution: Commercial papers is not a source of long-term finance. Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities.
[#400] If the dispersion around a security's return is larger ____________.
Correct Answer
(D) the security's risk is higher
Explanation
Solution: If the dispersion around a security's return is larger the security's risk is higher. A security risk assessment identifies, assesses, and implements key security controls in applications.