Which of the Following Statements Is False

question 49

Multiple Choice

Which of the following statements is false?

• A) An investor's preferences will determine only how much to invest in the tangent or efficient portfolio versus the risk-free investment.
• B) Conservative investors will invest a small amount in the tangent or efficient portfolio, choosing a portfolio on the line near the risk-free investment.
• C) Only aggressive investors will choose to hold the portfolio of risky assets, the tangent or efficient portfolio.
• D) Aggressive investors will invest more in the tangent portfolio, choosing a portfolio that is near the tangent portfolio or even beyond it by buying stocks on margin.

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Definitions:

Real Rate

The interest rate that has been adjusted for inflation, reflecting the true return of an investment.

Annual Coupon

refers to the fixed interest payment that a bond issuer agrees to pay to the bondholder once every year until the bond's maturity date.

Zero-Coupon Bond

A bond that is issued at a discount to its face value but pays no interest; the investor's return is the difference between the purchase price and the face value at maturity.

Par Value

The face value of a bond or stock, representing the amount that the issuer agrees to pay at maturity or the nominal value assigned to a share of stock for accounting purposes.