Which of the Following Statements Is False

question 31

Multiple Choice

Which of the following statements is false?

• A) A portfolio that costs nothing to construct is called a self-financing portfolio.
• B) The most obvious portfolio to use in a multifactor model is the market portfolio itself.
• C) In general, a self-financing portfolio is any portfolio with portfolio weights that sum to one rather than zero.
• D) We can construct a self-financing portfolio by going long on stocks, and going short on other stocks with equal market value.

Understand the process and effects of issuing common stock, including no par and stated value stocks, and the concept of paid-in capital.

Calculate and analyze dividend yields and understand their significance in assessing a company's financial health.

Grasp the fundamentals of corporate structure, including the advantages and disadvantages of incorporation.

Understand the accounting treatment and implications of treasury stock transactions and dividend distributions.

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Definitions:

Socially Optimal

A state in which resources are allocated in the most efficient way from a societal perspective, maximising collective welfare or benefit.

Pigovian Tax

A tax or charge levied on the production of a product that generates negative externalities. If set correctly, the tax will precisely offset the overallocation (overproduction) generated by the negative externality.

Clean Up

The process of removing contaminants, waste, or undesirable items from an area, thus restoring it to its original or acceptable condition.

Moral Hazard

The situation where one party takes on risk because they know that another party will bear the consequences.