An Important Difference Between CAPM and APT Is

question 36

Multiple Choice

An important difference between CAPM and APT is

• A)CAPM depends on risk-return dominance; APT depends on a no-arbitrage condition.
• B)CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium.
• C)implications for prices derived from CAPM arguments are stronger than prices derived from APT arguments.
• D)Both CAPM depends on risk-return dominance; APT depends on a no-arbitrage condition and CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium.

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