Which of the Following Statements Is False

question 49

Multiple Choice

Which of the following statements is false?

• A) The market portfolio is the efficient portfolio.
• B) Many practitioners believe it is sensible to use the CAPM and the security market line as a practical means to estimate a stock's required return and therefore a firm's equity cost of capital.
• C) If we plot individual securities according to their expected return and beta, the CAPM implies that they should all fall along the CML.
• D) As savvy investors attempt to trade to improve their portfolios, they raise the price and lower the expected return of the positive alpha stocks, and they depress the price and raise the expected return of negative alpha stocks, until the stocks are once again on the security market line and the market portfolio is efficient.

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Definitions:

Same Location

Describes a scenario where activities or entities are situated within the same geographical area or address.

Jobs

are positions of employment where individuals perform specific tasks and duties in exchange for compensation.

Divisional Structure

An organizational structure where the company is divided into semi-autonomous units or divisions, each responsible for certain products or services.

Functional Chimneys Problem

A term describing the lack of communication and collaboration between different departments in an organization, leading to inefficiency and conflict.