Which of the Following Statements Is False

question 9

Multiple Choice

Which of the following statements is false?

• A) The tangent portfolio is efficient and that, once we include the risk-free investment, all efficient portfolios are combinations of the risk-free investment and the tangent portfolio.
• B) The optimal portfolio of risky investments depends on how conservative or aggressive the investor is.
• C) By combining the efficient portfolio with the risk-free investment, an investor will earn the highest possible expected return for any level of volatility her or she is willing to bear.
• D) The efficient portfolio is the tangent portfolio, the portfolio with the highest Sharpe ratio in the economy.

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Definitions:

Retained Earnings

The portion of net income that is retained by a company rather than distributed to its shareholders as dividends, often used for reinvestment.

Market-to-Book Value

A ratio used to compare a company's current market price to its book value, indicating how highly the market values the company relative to its actual assets.

Financial Statements

A set of formal records that outline an entity's financial activities and condition, including the balance sheet, income statement, and cash flow statement.

Stock Market

A collection of markets and exchanges where the buying, selling, and issuance of shares of publicly-held companies occur.