Which of the Following Statements Is False

question 107

Multiple Choice

Which of the following statements is false?

• A) A portfolio is efficient if it has the highest possible Sharpe ratio; that is it is efficient if it provides the largest increase in expected return possible for a given increase in volatility.
• B) The required return for an investment is equal to a risk premium that is equal to the risk premium of the investor's current portfolio scaled by .
• C) Increasing the investment in investment I will increase the Sharpe ratio of portfolio P if its expected return E[R_i] exceeds the required return r_i, which is given by r_i = r_f + × (E[R_p] - r_f).
• D) If a security i's expected return is less than the required return r_i, we should reduce our holding of security i.

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Definitions:

Payroll Tax

Taxes imposed on employers and employees, calculated as a percentage of the salaries that employers pay their staff.

Tax Shifting

The process by which the economic burden of a tax is passed from one party to another.

Starting Wage

The initial salary offered to an employee by an employer when they begin a new job.

Excise Taxes

Taxes imposed on specific goods, such as tobacco and alcohol, either as a fixed amount per unit or as a percentage of the price.