Which of the following statements is false?
A) The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly.
B) Managers cannot act in the best interests of their shareholders unless they know their shareholders' average time preference for receiving their money and what risks a typical shareholder is prepared to assume.
C) Companies should deliberately increase their risk relative to the market only if the actions that increase the risk also increase the expected rate of return on the firm's assets by enough to completely compensate for the higher risk.
D) If the expected rate of return for a particular investment,as seen by the marginal investor,exceeds its required rate of return,we should soon observe an increase in demand for the investment,and the price will likely increase until a price is established that equates the expected return with the required return.
E) All of the above statements are correct.

Question

Quizplus · Accepted Answer

While managers should act in the best interests of shareholders, knowing the average time preference and risk tolerance of each individual shareholder is not necessary for them to do so. It is sufficient for managers to act in the best interests of the company as a whole, which in turn benefits shareholders.

Which of the Following Statements Is False