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When the CAPM assumptions hold, which of the following statements is FALSE? a) The capital market...

When the CAPM assumptions hold, which of the following statements is FALSE?

a) The capital market line goes through a risk-free asset

b) The capital market line goes through the market portfolio

c) The efficient frontier goes through a risk-free asset

d) The security market line goes through the market portfolio

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Answer #1

Answer: - Option (c) -  The efficient frontier goes through a risk-free asset

( Explanation:- When CAPM assumptions hold, then whether it is capital market line or security market line, both goes through market portfolio and also capital market line goes through a risk-free asset. So, option (a), (b) and (d) are true. And if we observe then efficient frontier does not go through a risk-free asset if CAPM assumptions hold, hence option (c) is false.)

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