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:

Present Value

Present value is a financial concept that involves determining the current worth of a future sum of money or stream of cash flows given a specific rate of return.

Second Class of Stock

A category of shares that have different rights and privileges than the primary class of stock in a company, often with different voting or dividend rights.

Unequal Voting Rights

A situation where shares are divided into classes, each with varying degrees of voting power in the company's decisions.

Lower Priority

A status indicating that a task or obligation is considered less important or urgent compared to others and can be addressed or fulfilled later.