Which of the Following Statements Is False

question 75

Multiple Choice

Which of the following statements is false?

• A) Margin investing is a risky investment strategy.
• B) Because our return on the risk-free investments is fixed and does not move with (or against) our portfolio, the correlation between the risk-free investment and the portfolio is always equal to one.
• C) Short selling the risk-free investment is equivalent to borrowing money at the risk-free interest rate through a standard loan.
• D) Margin investing can provide higher expected returns than investing in the efficient portfolio using only the funds we have available.

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Definitions:

Fair Value

An estimate of the market price of an asset or liability, reflecting what a willing buyer would pay a willing seller in an arm's length transaction.

Issue Price

The price at which new shares are offered to the public or bonds are sold, determined at the time of issue.

Stock Dividends Distributable

It represents the shares that are due to shareholders as a dividend but have not yet been distributed.