Which of the Following Statements Is CORRECT

question 25

Multiple Choice

Which of the following statements is CORRECT?

• A) The slope of the CML is ( _M − r_RF)/b_M.
• B) All portfolios that lie on the CML to the right of σ_M are inefficient.
• C) All portfolios that lie on the CML to the left of σ_M are inefficient.
• D) The slope of the CML is ( _M − r_RF)/σ_M.
• E) The Capital Market Line (CM
• L)is a curved line that connects the risk-free rate and the market portfolio.

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Definitions:

Stock Market

A public market for buying, selling, and issuance of stocks of publicly held companies, facilitating equity investment and ownership.

Value

The economic worth of a good, service, asset, or company based on the benefits or returns it provides.

Pre-Tax Cost

The expense associated with purchasing or investing before any taxes are applied.

Yield To Maturity

The total return anticipated on a bond if it is held until the date of maturity, accounting for both interest payments and the principal repayment.