Which of the Following Statements Is FALSE

question 26

Multiple Choice

Which of the following statements is FALSE?

• A)The CAPM remains the predominant model used in practice to determine the equity cost of capital.
• B)Low beta stocks have tended to perform somewhat better than the CAPM predicts.
• C)The empirically estimated security market line is somewhat steeper than that predicted by the CAPM.
• D)Some evidence suggests that the market risk premium has declined over time.

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Definitions:

Term of Loan

The duration over which a loan agreement is in effect, encompassing the time by which the loan must be repaid.

Rate of Return

The gain or loss on an investment over a specific period, expressed as a percentage of the investment's cost.

Nominal Rate

the interest rate before adjustments for inflation, often cited in loan and savings agreements.

Compounded Annually

Interest on a loan or investment is calculated once a year, with each year’s interest added to the principal for the subsequent year’s interest calculation.