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:

Psychodynamic Theory

Sigmund Freud’s perspective, which emphasizes the importance of unconscious motives and conflicts as forces that determine behavior.

Conflicting Personality

A situation or condition where an individual's traits or behaviors are at odds, leading to internal tension or inconsistency.

Drive-Reduction Theory

The view that organisms learn to engage in behaviors that have the effect of reducing drives.

Self-actualization

The process of realizing and fulfilling one's own potential and capabilities, often seen as the highest level of psychological development described by Maslow.