Which One of the Following Statements Is False

question 41

Multiple Choice

Which one of the following statements is false?

• A) When we compute the return of a security based on the average payoff we expect to receive, we call it the expected return.
• B) The notion that investors prefer to have a safe income rather than a risky one of the same average amount is call risk aversion.
• C) Because investors are risk averse, the risk-free interest rate is not the right rate to use when converting risky cash flows across time.
• D) The more risk averse investors are, the higher the current price of a risky asset will be compared to a risk-free bond.

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Definitions:

Noncumulative Preferred Stock

A type of preferred stock where dividends do not accumulate if they are not declared or paid in any given year, contrasting with cumulative preferred stock.

Dividends Declared

A company's announcement of a forthcoming dividend payment to its shareholders.

Earnings Per Share

A financial metric indicating the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of a company's profitability.

Net Income

The final profit figure for a company after subtracting all operational expenses, taxes, and costs from the gross revenue.