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.

---

Definitions:

Orbital

A mathematical function describing the location and wave-like behavior of an electron or pair of electrons in an atom.

Electron

A subatomic particle with a negative charge, orbiting the nucleus of an atom and involved in chemical bonds and electricity.

S Orbital

A type of atomic orbital that is spherical in shape, representing the probability distribution of an electron.

Shape

The external form, contours, or outline of an object or figure, often influencing its functionality and perceived aesthetics.