Which of the Following Statements Is False

question 48

Multiple Choice

Which of the following statements is false?

• A) The risk premium of a security is equal to the market risk premium (the amount by which the market's expected return exceeds the risk-free rate), divided by the amount of market risk present in the security's returns measured by its beta with the market.
• B) We refer to the beta of a security with the market portfolio simply as the securities beta.
• C) There is a linear relationship between a stock's beta and its expected return.
• D) A security with a negative beta has a negative correlation with the market, which means that this security tends to perform well when the rest of the market is doing poorly.

Analyze how taxes affect market outcomes and the burden of tax on buyers and sellers.

Understand the concept of elasticity and how it affects the burden of taxation.

Evaluate the impact of rent control laws on the market.

Calculate the effects of a per-unit tax on market equilibrium, including the size of the tax and its distribution between buyers and sellers.

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Definitions:

Lookback Options

A type of option which allows the holder to "look back" over the time period of the option to select a price that is most advantageous for exercising their option.

Underlying Asset

Refers to the financial instrument (e.g., stock, bond, commodity) on which a derivative's value is based.

Payoffs

The returns or gains received from an investment or decision, which can vary based on different outcomes or scenarios.

Binary Options

Financial instruments that pay out either a fixed amount or nothing at all, depending on whether a certain condition is met at expiration, typically related to the price movement of a security.