Which of the Following Statements Is False

question 6

Multiple Choice

Which of the following statements is false?

• A) When an investor chooses her optimal portfolio, she will do so by finding the tangent line using the risk-free rate that corresponds to her investment horizon.
• B) If the market portfolio is not efficient, savvy investors who recognize that the market portfolio is not optimal will push prices and expected returns back into balance.
• C) Even though different investors may research different stocks, their information will not impact the market portfolio since there is no way to share this information with other investors.
• D) In the real world borrowers pay higher interest rates than savers receive.

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Definitions:

Cost Model

An accounting approach that measures an asset based on its historical cost minus any accumulated depreciation and impairment losses.

Impairment

Reduction in the recoverable value of an asset below its carrying amount.

Recoverable Amount

The higher value between an asset's fair market value less costs to sell and its value in use.

AASB 136

The Australian Accounting Standards Board standard that deals with impairment of assets, requiring assets to be carried at no more than their recoverable amount.