Which of the Following Statements Is FALSE

question 69

Multiple Choice

Which of the following statements is FALSE?

• A)As long as investors can borrow or lend at the same interest rate as the firm,homemade leverage is a perfect substitute for the use of leverage by the firm.
• B)When investors use leverage in their own portfolios to adjust the leverage choice made by the firm,we say that they are using homemade leverage.
• C)The value of the firm is determined by the present value (PV)of the cash flows from its current and future investments.
• D)The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of the firm.

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Definitions:

Social Dominance Theory

A social psychological theory suggesting that societies maintain hierarchical group relationships, with dominant groups exploiting or oppressing subordinate ones.

Great Violence

Intense or extreme physical force used to harm others or cause destruction, often associated with aggression or conflict.

Outgroup Homogeneity Bias

Outgroup Homogeneity Bias is the tendency to view individuals from outside one’s own group as more similar to each other than those within the group, leading to stereotypical thinking.

Group Attribution Error

The tendency to make broad stereotypical judgments about a group based on the actions of a few individuals within that group.