Which of the following statements is FALSE?
A) A portfolio is efficient if it has the highest possible Sharpe ratio; that is it is efficient if it provides the largest increase in expected return possible for a given increase in volatility.
B) The required return for an investment is equal to a risk premium that is equal to the risk premium of the investor's current portfolio scaled by ![Which of the following statements is FALSE? A) A portfolio is efficient if it has the highest possible Sharpe ratio; that is it is efficient if it provides the largest increase in expected return possible for a given increase in volatility. B) The required return for an investment is equal to a risk premium that is equal to the risk premium of the investor's current portfolio scaled by . C) Increasing the investment in investment I will increase the Sharpe ratio of portfolio P if its expected return E[R<sub>i</sub>] exceeds the required return r<sub>i</sub>, which is given by r<sub>i</sub> = r<sub>f</sub> + × (E[R<sub>p</sub>] - r<sub>f</sub>) . D) If a security i's expected return is less than the required return r<sub>i</sub>, we should reduce our holding of security i.](https://d2lvgg3v3hfg70.cloudfront.net/TB2720/11ea7ff1_7832_9c9d_846e_55e16b4afc14_TB2720_11_TB2720_11.jpg)
.
C) Increasing the investment in investment I will increase the Sharpe ratio of portfolio P if its expected return E[Ri] exceeds the required return ri, which is given by ri = rf + ![Which of the following statements is FALSE? A) A portfolio is efficient if it has the highest possible Sharpe ratio; that is it is efficient if it provides the largest increase in expected return possible for a given increase in volatility. B) The required return for an investment is equal to a risk premium that is equal to the risk premium of the investor's current portfolio scaled by . C) Increasing the investment in investment I will increase the Sharpe ratio of portfolio P if its expected return E[R<sub>i</sub>] exceeds the required return r<sub>i</sub>, which is given by r<sub>i</sub> = r<sub>f</sub> + × (E[R<sub>p</sub>] - r<sub>f</sub>) . D) If a security i's expected return is less than the required return r<sub>i</sub>, we should reduce our holding of security i.](https://d2lvgg3v3hfg70.cloudfront.net/TB2720/11ea7ff1_7832_c3ae_846e_17118ba644b0_TB2720_11_TB2720_11.jpg)
× (E[Rp] - rf) .
D) If a security i's expected return is less than the required return ri, we should reduce our holding of security i.
Correct Answer:
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