Which of the Following Statements Regarding the Capital Allocation Line

question 29

Multiple Choice

Which of the following statements regarding the capital allocation line (CAL) is false?

• A)The CAL shows risk-return combinations.
• B)The slope of the CAL equals the increase in the expected return of the complete portfolio per unit of additional standard deviation.
• C)The slope of the CAL is also called the reward-to-volatility ratio.
• D)The CAL is also called the efficient frontier of risky assets in the absence of a risk-free asset.

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Definitions:

Internal Control

A system of policies and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Employees Rotated

A process where employees are moved between different jobs or tasks to gain experience, reduce monotony, or improve workforce flexibility.

Monthly Bank Statements

Detailed financial statements provided by banks, summarizing account activity, balances, and other financial transactions for each month.

Endorsing

Endorsing involves signing the back of a check or other negotiable instruments to make it payable to someone other than the original payee or to authorize its use.