Both the CAPM and APT Suggest That an Asset Should

question 38

Multiple Choice

Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return

• A)when it has a greater systematic risk.
• B)when it has a greater risk in isolation.
• C)when it has a lower systematic risk.
• D)when it has a lower systematic risk and a lower risk in isolation.

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Definitions:

Overpromotion Syndrome

A situation where an individual is promoted to a position beyond their level of competence, often leading to underperformance.

Lawrence Peter

A Canadian educator and "hierarchiologist," best known for formulating the Peter Principle, which suggests that people in a hierarchy tend to rise to their "level of incompetence."

Successful Transition

The process of smoothly moving from one state or condition to another in a way that achieves intended outcomes.

Delegate Tasks

The act of assigning responsibility and authority to someone else to complete specific activities while retaining the ultimate accountability for their outcome.