Which Statement Is Not True Regarding the Capital Market Line

question 26

Multiple Choice

Which statement is not true regarding the capital market line (CML) ?

• A) The CML is the line from the risk-free rate through the market portfolio.
• B) The CML is the best attainable capital allocation line.
• C) The CML is also called the security market line.
• D) The CML always has a positive slope.
• E) The risk measure for the CML is standard deviation.

Understand the characteristics and purposes of various types of reports in business communication.

Recognize the importance of a clear purpose statement using action verbs in report writing.

Differentiate between primary and secondary data sources and their relevance in the preparation of business reports.

Identify the key elements to be included in meeting minutes and the significance of accurately documenting motions and actions.

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Definitions:

Risk Premium

The additional return expected for investing in a risky asset over a risk-free asset.

Dividend Per Share

The sum of declared dividends for every common share issued, divided by the total number of shares outstanding.

Free Cash Flow

The net cash flow a business produces following the deduction of operational expenses and investment in maintaining its fixed assets.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reported on the income statement.