Which of the Following Statements Is False

question 97

Multiple Choice

Which of the following statements is false?

• A) A portfolio is efficient if it has the highest possible Sharpe ratio; that is, it is efficient if it provides the largest increase in expected return possible for a given increase in volatility.
• B) The required return for an investment is equal to a risk premium that is equal to the risk premium of the investor's current portfolio scaled by
• C) Increasing the investment in investment I will increase the Sharpe ratio of portfolio P if its expected return E[R_i] exceeds the required return r_i, which is given by r_i = r_f + × (E[R_p] - r_f).
• D) If a security i's expected return is less than the required return r_i, we should reduce our holding of security i.

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Definitions:

Percent of Sales Method

A financial forecasting technique that estimates certain balance sheet and income statement items as a fixed percentage of projected sales.

Uncollectible Expenses

Costs that a business incurs from credits extended to customers that are not expected to be paid back, often recognized as bad debt expense.

Credit Sales

Sales made by a business where the payment is deferred to a later date, typically recorded as accounts receivable until payment is received.

Debit Balance

An account balance that occurs when the total of debits in an account exceeds the total of credits, typical for asset and expense accounts.