Which of the Following Statements Is FALSE

question 74

Multiple Choice

Which of the following statements is FALSE?

• A)If we increase the fraction invested in the efficient portfolio beyond 100%,we are short selling the risk-free investment.
• B)As we increase the fraction invested in the efficient portfolio,we increase our risk premium but not our risk proportionately.
• C)To earn the highest possible expected return for any level of volatility we must find the portfolio that generates the steepest possible line when combined with the risk-free investment.
• D)Every investor should invest in the tangent portfolio independent of his or her taste for risk.

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Definitions:

Coefficient Of Correlation

The coefficient of correlation is a statistical measure that calculates the strength and direction of a linear relationship between two variables.

Coefficient Of Determination

A statistic that measures the proportion of the variance in the dependent variable that is predictable from the independent variable(s).

Linear Regression Model

A statistical method for modelling the relationship between a dependent variable and one or more independent variables by fitting a linear equation to observed data.

Random Error Term

A component of a statistical model that captures the variability not explained by the explanatory variables.