Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)The unlevered beta measures the market risk of the firm's business activities,ignoring any additional risk due to leverage.
• B)If a firm holds $1 in cash and has $1 of risk-free debt,then the interest earned on the cash will equal the interest paid on the debt.The cash flows from each source cancel each other,just as if the firm held no cash and no debt.
• C)The unlevered beta measures the market risk of the firm without leverage,which is equivalent to the beta of the firm's assets.
• D)When a firm changes its capital structure without changing its investments,its levered beta will remain unaltered,however,its asset beta will change to reflect the effect of the capital structure change on its risk.

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Definitions:

Missing Value

A data point that is lost or not recorded in a dataset.

Equal Payments

Regular payments of the same amount over a period of time, typically in the context of loans or leases.

Missing Value

A term used in statistics and data analysis to describe data points or elements that are absent or not recorded.

Equivalent Financial Position

A state in which two or more financial scenarios provide the same economic value or utility to an investor or individual.