Which of the Following Statements Is False

question 42

Multiple Choice

Which of the following statements is false?

• A) The Capital Asset Pricing Model is the most important method for estimating the cost of capital that is used in practice.
• B) Because the risk that determines expected returns is unsystematic risk, which is measured by beta, the cost of capital for an investment is the expected return available on securities with the same beta.
• C) A common assumption is that the project has the same risk as the firm.
• D) To determine a project's cost of capital we need to estimate its beta.

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Definitions:

Check Clearing

The process by which banks settle transactions made by checks, ensuring that the funds move from the check writer's account to the recipient's.

Fractional Reserve Banking

A system in which depository institutions held reserves that are less than the amount of total deposits.

Actual Reserves

The amount of funds that a bank has on hand and in reserve accounts, which can be used to meet any withdrawal or payment demands.

Vault Cash

The physical currency a bank holds in its vault as part of its required reserves or for daily operations.