Which of the Following Statements Is Correct

question 16

Multiple Choice

Which of the following statements is correct?

• A) If international financial markets are integrated, the market portfolio in the CAPM formula represents the world market portfolio.
• B) If international financial markets are integrated, the market portfolio in the CAPM formula represents the domestic market portfolio.
• C) If international financial markets are divided, the market portfolio in the CAPM formula represents the domestic market portfolio.
• D) If international financial markets are divided, the market portfolio in the CAPM formula represents the world market portfolio.

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Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Present Value

The value of a future amount of money in today's terms, discounted at a particular rate.

Cost Of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds.