Which of the following statements is correct?
A) Penny stocks are the stocks of small companies that are priced below $1 per share.
B) Restricted stocks are shares of stock issued to executives that have limitations on voting rights.
C) The Capital Market Line graphs the relationship between return and risk (beta).
D) All of these choices are correct.

Question

Quizplus · Accepted Answer

Penny stocks refer to the stocks of small companies that are typically priced below $5 per share, not necessarily below $1. They are known for their high volatility and risk. The other statements are incorrect: Restricted stocks often have limitations on sale rather than on voting rights, and the Capital Market Line (CML) represents the risk-return trade-off for efficient portfolios, graphing the risk (measured by standard deviation) against expected return, not the relationship between return and risk (beta), which is depicted by the Security Market Line (SML).

Which of the Following Statements Is Correct