Which of the Following Statements Is False

question 71

Multiple Choice

Which of the following statements is false?

• A) The CAPM remains the predominant model used in practice to determine the equity cost of capital.
• B) Low beta stocks have tended to perform somewhat better than the CAPM predicts.
• C) The empirically estimated security market line is somewhat steeper than that predicted by the CAPM.
• D) Some evidence suggests that the market risk premium has declined over time.

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Definitions:

Cash Interest

The actual amount of interest paid in cash by a borrower during a given period for the use of borrowed funds.

Interest Expense

The cost incurred by an entity for borrowed funds, reflecting the interest payments due on any type of debt for a specific period.

Issuing Company

A corporation or entity that releases or sells financial instruments like stocks or bonds to raise capital.

Trustee

An independent party appointed to represent the bondholders.