Which of the Following Statements Is FALSE

question 75

Multiple Choice

Which of the following statements is FALSE?

• A) The payback rule is useful in cases where the cost of making an incorrect decision might not be large enough to justify the time required for calculating the net present value (NPV).
• B) The payback rule is reliable because it considers the time value of money and depends on the cost of capital.
• C) For most investment opportunities, expenses occur initially and cash is received later.
• D) Fifty percent of firms surveyed reported using the payback rule for making decisions.

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Definitions:

Treasury Bills

Short-term U.S. government debt obligations with maturities of one year or less, considered a safe and liquid investment.

Optimal Weights

The proportion of each asset in a portfolio that maximizes its expected return for a given level of risk.

Expected Rate

Typically refers to the rate of return anticipated on an investment or project, based on projections or historical data.

Nominal Sharpe Ratio

A measure of risk-adjusted performance that indicates the average return minus the risk-free return divided by the standard deviation of return on an investment.