Student Forums CMA Part 2 Section B: Corporate Finance B.1. Risk and Return Q ID: ICMA 10.QA.P2.013 ( Risk and Return and Types of Risk) — RRR Help !

Q ID: ICMA 10.QA.P2.013 ( Risk and Return and Types of Risk) — RRR Help !

  • This topic has 1 reply, 2 voices, and was last updated 6 months ago by Lynn Roden.
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  • #226838
    selim mentes
    Participant

    Dear respondant

    In that question Required rate of return has been asked and want to click applicable statment about that term …

    Actually i have also agree with answer key which is shown that it should be “RRR , satisfies all of the other listed requirements.” ; i have a doubt that why the option b (can be used to determine the value of a financial security) is not true ?

    As far as i understand i can use the term RRR in calculation of intrinsic value of stock ( its formula given Expected dividend / Investing RRR)  and it means this is the value which it shoudl be in market …. If it is right , Isnt that RRR could be used in determining financial security ?

    many thanks

    Selim

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  • #226840
    Lynn Roden
    HOCK international

    Hello selim mentes,

    Your understanding is correct. The correct answer to that question is that all of the other three answers are correct. The correct answer is not saying that the option “can be used to determine the value of a financial security” is not true. It is true, just as the other two incorrect answers are also true. However, none of those answers are the best answer to this multiple-choice question, so none of them is the correct answer.

    The correct answer to a multiple-choice question is the one that is the best choice. One or more of the other answer choices may also be true, but there will be one choice that is the best choice among all the choices given, and that will be the correct answer. That is the case with this question.

    Lynn

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