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:

Elastic Demand

A situation where the demand for a product is sensitive to price changes, meaning small price changes lead to large changes in quantity demanded.

Barriers To Entry

Factors that prevent or hinder new competitors from easily entering an industry or area of business, often maintaining high levels of profit for those already established.

Product Differentiation

The process of distinguishing a product or service from others in the market to make it more attractive to a particular target market.

Monopolistic Competition

A market structure where many firms offer products that are similar but not perfect substitutes, allowing for some degree of market power.