Use the Figure for the Question(s)below

question 24

Multiple Choice

Use the figure for the question(s) below.Consider the following graph of the security market line:
-Which of the following statements regarding portfolio "C" is/are correct? 1.Portfolio "C" has a negative alpha.
2.Portfolio "C" is overpriced.
3.Portfolio "C" is less risky than the market portfolio.
4.Portfolio "C" should not exist if the market portfolio is efficient.

• A)1 and 3
• B)2 and 4
• C)1,3,and 4
• D)3 only

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, providing a basis for budgeting and financial planning.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's output increases, usually due to inefficiencies that arise with large-scale production.

Production Volume

The quantity of products that a manufacturing system can produce over a specific period of time.

Total Cost

The complete cost of production or operation, including fixed and variable costs, associated with a business activity or process.