Which of the Following Statements Is False

question 21

Multiple Choice

Which of the following statements is false?

• A) The expected return of a portfolio should correspond to the portfolio's beta.
• B) Graphically the line through the risk-free investment and the market portfolio is called the capital market line (CML).
• C) The beta of a portfolio is the weighted average beta of the securities in the portfolio.
• D) By holding a negative beta security, an investor can reduce the overall market risk of his or her portfolio.

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Definitions:

Monopolistically Competitive Industry

Refers to a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing the excess over the opportunity cost.

Pure Competition

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price-taking behavior.

Nonprice Competition

Competition based on distinguishing one’s product by means of product differentiation and then advertising the distinguished product to consumers.