Stan is a real estate broker in Colorado. He has identified a property for a fast food outlet and has asked four friends to contribute money to the purchase and gain partial ownership. Stan will manage the property and negotiate the lease for the fast food franchise. In this agreement he must comply with state and federal securities laws in arranging this investment group.

Given equal circumstances and generally rising costs, which inventory method will increase the tax expense the most?

a. FIFO b. LIFO c. Average Cost d. Income tax expense for the period will be the same under all assumptions.

Which of the following statements is MOST correct concerning diversification and risk?

A) Proper diversification generally results in the elimination of risk. B) Risk-averse investors often choose companies from different industries for their portfolios because the correlation of returns is less than if all the companies came from the same industry. C) Risk-averse investors often select portfolios that include only companies from the same industry group because the familiarity reduces the risk. D) Only wealthy investors can diversify their portfolios because a portfolio must contain at least 50 stocks to gain the benefits of diversification.