Which of the Following Statements Is FALSE

question 28

Multiple Choice

Which of the following statements is FALSE?

• A)Modigliani and Miller's conclusion verified the common view,which stated that even with perfect capital markets,leverage would affect a firm's value.
• B)We can evaluate the relationship between risk and return more formally by computing the sensitivity of each security's return to the systematic risk of the economy.
• C)Investors in levered equity require a higher expected return to compensate for its increased risk.
• D)Leverage increases the risk of equity even when there is no risk that the firm will default.

---

Definitions:

Total Assets

The sum value of everything a company owns, including both current and non-current assets.

Expenses Overstated

A situation where the recorded amount of expenses is higher than the actual incurred expenses.

Psychosocial Theory

A theoretical framework that explores the interaction between individual psychological processes and social influences across the lifespan.

Identity Confusion

A period of uncertainty and experimentation with regard to personal identity and values, often occurring during adolescence.