Which of the Following Statements Is FALSE

question 20

Multiple Choice

Which of the following statements is FALSE?

• A)When the Capital Asset Pricing Model (CAPM)assumptions hold, choosing an optimal portfolio is relatively straightforward; it is the combination of the risk-free investment and the market portfolio.
• B)Because all investors should hold risky securities in the same proportions as the efficient portfolio, their combined portfolio will also reflect the same proportions as the efficient portfolio.
• C)A portfolio's risk premium and volatility are determined by the fraction that is invested in the market.
• D)Graphically, when the tangent line goes through the market portfolio, it is called the security market line (SML).

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Definitions:

Accounting Convention

Accepted accounting principles that guide the reporting and financial presentation of a company's accounts.

Qualitative Characteristics

Attributes that enhance the usefulness of financial information, including understandability, relevance, reliability, and comparability.

GAAP Constraints

Limitations or guidelines in Generally Accepted Accounting Principles that direct the application of accounting procedures.

Timeliness

The provision of information to users quickly enough for it to influence their decisions, a crucial aspect in financial reporting.