Which of the Following Statements Is FALSE

question 126

Multiple Choice

Which of the following statements is FALSE?

• A)Because all other risk is diversifiable,it is an investment's beta with respect to the efficient portfolio that measures its sensitivity to systematic risk,and therefore determines its cost of capital.
• B)If a security's expected return exceeds its required return given our current portfolio,then we can improve the performance of our portfolio by adding more of the security.
• C)The appropriate risk premium for an investment can be determined from its beta with the efficient portfolio.
• D)As we buy shares of a security i,its correlation with our portfolio P will increase,ultimately raising its required return until E[Ri] = Rp.

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Definitions:

Spinal Cord Damage

Damage to the spinal cord that can lead to loss of function, sensation, or mobility below the site of the injury.

Erections

The physiological phenomenon where the penis becomes firm, engorged, and enlarged.

Heart Attack

A medical emergency where blood flow to the heart is suddenly blocked, often by a blood clot, leading to damage or death of heart muscle.

Risk Level

The degree of danger or likelihood of experiencing harm or loss in a given situation or activity.