Which of the Following Statements Is FALSE

question 6

Multiple Choice

Which of the following statements is FALSE?

• A) 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.
• B) The Capital Asset Pricing Model (CAPM) assumptions hold that the return on any portfolio is the combination of the risk-free rate of return plus a risk premium proportional to the amount of systematic risk in the investment.
• C) Graphically, when the tangent line goes through the market portfolio, it is called the security market line (SML).
• D) A portfolio's risk premium and volatility are determined by the fraction that is invested in the market.

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Definitions:

Disposable Income

Fiscal assets at households' disposal for spending and saving after income taxes have been subtracted.

Consumption

Households' utilization of both products and services.

MPS

The marginal propensity to save, which is the fraction of additional income that is saved.

Disposable Income

The fiscal envelope for household spending and saving activity subsequent to income tax adjustments.