Which of the Following Statements Is False

question 82

Multiple Choice

Which of the following statements is false?

• A) Because all other risk is diversifiable, it is an investment's beta with respect to the efficient portfolio that measures its sensitivity to systematic risk, and therefore determines its cost of capital.
• B) If a security's expected return exceeds its required return given our current portfolio, then we can improve the performance of our portfolio by adding more of the security.
• C) The appropriate risk premium for an investment can be determined from its beta with the efficient portfolio.
• D) As we buy shares of a security i, its correlation with our portfolio P will increase, ultimately raising its required return until E[R_i] = R_p.

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Definitions:

Magnesium

A chemical element with the symbol Mg, essential for living cells, playing a critical role in over 300 enzymatic reactions, including energy production.

Manganese

A chemical element with the symbol Mn and atomic number 25, known for its importance in metabolism and enzyme function in living organisms.

Phosphorus

Phosphorus is a chemical element with symbol P, essential for life as part of the DNA and RNA structure, energy transfer molecules like ATP, and in bones and teeth.

Photosynthetic Pigments

Photosynthetic pigments are molecules present in plants and certain bacteria that absorb specific wavelengths of light and capture energy for photosynthesis.