Which of the Following Statements Is False

question 99

Multiple Choice

Which of the following statements is false?

• A) Because of the higher and uncompensated risk involved, no investor should choose a portfolio with a negative alpha.
• B) Because the average portfolio of all investors is the market portfolio, the average alpha for all investors is zero.
• C) The market portfolio can be inefficient if a significant number of investors misinterpret information and believe they are earning a positive alpha when they are actually earning a negative alpha.
• D) If no investor earns a positive alpha, then no investor can earn a negative alpha, and the market portfolio must be efficient.

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Definitions:

Multinational Financial Management

The financial management practices of a company that operates in more than one country, focusing on currency exchange rates, investment strategies, and international finance regulations.

Financial Analysts

Professionals who evaluate investments, financial data, and economic trends to help make investment decisions or manage financial portfolios.

Currency Values

The worth of one country's currency in terms of another's, influenced by economic conditions and political stability.

Currency Cross Rate

The exchange rate between two currencies, calculated based on their common exchange rates with a third currency, usually the US dollar, without needing direct exchange between the two currencies.