Which of the Following Statements Is False

question 106

Multiple Choice

Which of the following statements is false?

• A) Because all investors should hold the risky securities in the same proportions as the efficient portfolio, their combined portfolio will also reflect the same proportions as the efficient portfolio.
• B) When the CAPM assumptions hold, choosing an optimal portfolio is relatively straightforward: it is the combination of the risk-free investment and the market portfolio.
• C) Graphically, when the tangent line goes through the market portfolio, it is called the security market line (SML).
• D) A portfolio's risk premium and volatility are determined by the fraction that is invested in the market.

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Definitions:

Return On Total Assets

A financial ratio that measures the profitability of a company by calculating how effectively a company uses its total assets to generate profit.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, equity, revenue, expenses, and cash flows of a parent company and its subsidiaries as one entity.

Equity Method

A method of accounting that allows a company to record profits and losses based on its share of ownership in another company.

Controlling Influence

The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, typically seen in parent-subsidiary relationships.