Which of the Following Statements Is FALSE

question 87

Multiple Choice

Which of the following statements is FALSE?

• A)The imperfections in the CAPM may be critical in the context of capital budgeting and corporate finance,where errors in estimating the cost of capital are likely to be far more important than small discrepancies in the project cash flows.
• B)To estimate the expected market risk premium,we can look at the historical average excess return of the market over the risk-free interest rate.
• C)The highest beta stocks have tended to underperform what the CAPM predicts.
• D)Given an assessment of an index's future cash flows,we can estimate the expected return of the market by solving for the discount rate that is consistent with the current level of the index.

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Definitions:

Price Floor

A government-imposed minimum price that can be charged for a good or service, aimed at preventing prices from falling too low.

Quantity Supplied

Refers to the amount of a good or service that producers are willing to sell at a given price over a specific period.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price.

Rent-Controlled Apartments

Rent-controlled apartments are rental units subject to governmental regulations that limit the amount landlords can charge for rent, often to protect tenants from rapid price increases.