Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A)We can improve the performance of our portfolio by selling stocks with negative alphas.
• B)The market portfolio is on the SML,and according to the CAPM,since all other portfolios are inefficient,they will not fall on the SML.
• C)The difference between a stock's expected return and its required return according to the security market line is called the stock's alpha.
• D)The risk premium for any security is proportional to its beta with the market.

---

Definitions:

Work in Process Inventory

Items that are partially completed during manufacturing, which are not yet ready for sale.

Direct Labor Costs

Costs that can be directly attributed to the production of goods or services, such as wages paid to workers manufacturing a product.

Net Operating Income

This is the income derived from normal business operations after deducting operating expenses but before interest and taxes.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested in the business.