Which of the Following Statements Is False

question 91

Multiple Choice

Which of the following statements is false?

• A) The imperfections in the CAPM may be critical in the context of capital budgeting and corporate finance, where errors in estimating the cost of capital are likely to be far more important than small discrepancies in the project cash flows.
• B) To estimate the expected market risk premium we can look at the historical average excess return of the market over the risk-free interest rate.
• C) The highest beta stocks have tended to underperform what the CAPM predicts.
• D) Given an assessment of an index's future cash flows, we can estimate the expected return of the market by solving for the discount rate that is consistent with the current level of the index.

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Definitions:

Delusions of Persecution

False beliefs that one is being persecuted, watched, or conspired against, often seen in paranoid disorders.

Paranoid Schizophrenia

A subtype of schizophrenia characterized by prominent delusions or auditory hallucinations in the context of relative preservation of cognitive functioning and affect.

Oxygen Deprivation

A condition resulting from an insufficient supply of oxygen to the body that can lead to various health complications.

Schizophrenia

A grave psychological ailment manifested by disruptions in reasoning, interpreting reality, affectivity, verbal communication, personal identity, and behavior.