Which of the Following Statements Is CORRECT?
A) the Slope $\tilde r$

question 3

Multiple Choice

Which of the following statements is CORRECT?

• A) The slope of the CML is (
• \(\tilde r\) _M ? r_RF)/b_M.
• B) All portfolios that lie on the CML to the right of ?_M are inefficient.
• C) All portfolios that lie on the CML to the left of ?_M are inefficient.
• D) The slope of the CML is (
• \(\tilde{r}\) _M ? r_RF)/?_M.
• E) The Capital Market Line (CML) is a curved line that connects the risk-free rate and the market portfolio.

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Definitions:

Negative Net Worth

A financial situation where total liabilities exceed total assets, indicating financial distress.

Technical Insolvency

A situation where a company is unable to meet its short-term liabilities due to a lack of liquid assets, even though its total assets may exceed its liabilities.

Accounting Insolvency

A situation where the total liabilities of an entity exceed its total assets, indicating an inability to pay debts as they come due.

Priority Of Claims

Priority of claims refers to the hierarchical order in which creditors and shareholders are paid in the event of a company's liquidation, dictated by legal and contractual obligations.