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:

Internal Causes

Factors within a person, such as attitudes, traits, or abilities, that influence their behavior.

Self-Fulfilling Prophecy

A belief or expectation that influences behaviors in a way that causes the belief to become a reality.

Attribution Theory

A theory focused on how people interpret events and how this relates to their thinking and behavior, specifically how they attribute causes to events and other people's actions.

External Causes

Factors outside an individual that influence events or behaviors, such as environmental conditions or actions from other people.