Which of the Following Statements Is FALSE

question 63

Multiple Choice

Which of the following statements is FALSE?

• A)The market portfolio is the efficient portfolio.
• B)Many practitioners believe it is sensible to use the CAPM and the security market line as a practical means to estimate a stock's required return and therefore a firm's equity cost of capital.
• C)If we plot individual securities according to their expected return and beta,the CAPM implies that they should all fall along the CML.
• D)As savvy investors attempt to trade to improve their portfolios,they raise the price and lower the expected return of the positive alpha stocks,and they depress the price and raise the expected return of negative alpha stocks,until the stocks are once again on the security market line and the market portfolio is efficient.

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Definitions:

Italy

A country in Southern Europe, known for its rich history, art, architecture, fashion, and cuisine, and home to the Vatican as well as numerous UNESCO World Heritage Sites.

Schlieffen Plan

A strategic military plan developed by German General Alfred von Schlieffen, proposing a quick victory against France then turning east to fight Russia in a two-front war.

Neutral Nation

A sovereign state which refrains from all participation in armed conflict, adhering to a policy of neutrality recognized by other states.

Belgium

A country in Western Europe known for its medieval towns, Renaissance architecture, and as the headquarters of the European Union and NATO.