In a World Where the CAPM Holds, Which One of the Following

question 41

Multiple Choice

In a world where the CAPM holds, which one of the following is not a true statement regarding the capital market line?

• A) The capital market line always has a positive slope.
• B) The capital market line is also called the security market line.
• C) The capital market line is the best-attainable capital allocation line.
• D) The capital market line is the line from the risk-free rate through the market portfolio.

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Definitions:

Revenue

The total amount of income generated by the sale of goods or services related to the company's primary operations.

Cash Dividends

Payments made by a corporation to its shareholders from profits, distributing earnings in the form of cash.

Equity Securities

Equity securities represent ownership interest held in a company by investors in the form of shares of stock, which may generate income through dividends and potential appreciation.

Highly Liquid Securities

Financial instruments that can easily be converted into cash with minimal impact on their price.