Which of the Following Statements Is FALSE

question 12

Multiple Choice

Which of the following statements is FALSE?

• A)As a practical matter,it is extremely difficult to identify portfolios that are efficient because we cannot measure the expected return and the standard deviation of a portfolio with great accuracy.
• B)The portfolios in a multifactor model can be thought of as either risk factors themselves or portfolios of stocks correlated with unobservable risk factors.
• C)Each factor beta is the expected percent change in the excess return of a security for a 1% change in the excess return of the factor portfolio.
• D)Even if the market portfolio is not efficient,it still must capture all components of systematic risk.

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Definitions:

Net Operating Income

A rephrased description: Operating profit after deducting operating expenses but before interest and taxes.

Operating Assets

Assets that are used by a company in its day-to-day operations to generate revenues, such as buildings, machinery, and equipment.

Minimum Required Rate

The lowest return rate that a project or investment must yield to be considered viable or acceptable.

Net Operating Income

A financial metric that calculates a company's profit after operating expenses are subtracted from its operating income.