Which of the following statements is FALSE?
A)The Sharpe ratio of the portfolio tells us how much our expected return will increase for a given increase in volatility.
B)We should continue to trade securities until the expected return of each security equals its required return.
C)The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio.
D)If security i's required return exceeds its expected return,then adding more of it will improve the performance of the portfolio.

Question

Quizplus · Accepted Answer

If security i's required return exceeds its expected return, then adding more of it will actually lower the overall performance of the portfolio. This is because the security is not meeting the expected return and is therefore not adding value to the portfolio.

Which of the Following Statements Is FALSE