Which of the Following Statements Is False

question 91

Multiple Choice

Which of the following statements is false?

• A) The imperfections in the CAPM may be critical in the context of capital budgeting and corporate finance, where errors in estimating the cost of capital are likely to be far more important than small discrepancies in the project cash flows.
• B) To estimate the expected market risk premium we can look at the historical average excess return of the market over the risk-free interest rate.
• C) The highest beta stocks have tended to underperform what the CAPM predicts.
• D) Given an assessment of an index's future cash flows, we can estimate the expected return of the market by solving for the discount rate that is consistent with the current level of the index.

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Definitions:

An Idea

A concept, thought, or suggestion intended for potential value creation or problem solving.

IP Rights

Intellectual Property Rights, which are the legal rights granted to the inventors or creators to protect their inventions, literary and artistic works, symbols, names, and images used in commerce.

China

A country in East Asia, known for its vast history, cultural significance, and as a major global economic power.

Violate

To break or fail to comply with a rule or formal agreement.