According to the Capital Asset Pricing Model (CAPM), Which One

question 66

Multiple Choice

According to the Capital Asset Pricing Model (CAPM) , which one of the following statements is false?

• A) The expected rate of return on a security increases in direct proportion to a decrease in the risk-free rate.
• B) The expected rate of return on a security increases as its beta increases.
• C) A fairly priced security has an alpha of zero.
• D) In equilibrium, all securities lie on the security market line.
• E) All of the statements are true.

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Definitions:

Revenue

The aggregate financial gain acquired by a company from its essential sales activities involving goods or services.

Credit Normal Balance

The usual balance side for credit accounts, typically seen in liabilities, equity, and revenue accounts.

Adjusting Entry

Journal entries made at the end of an accounting period to update accounts for accurate financial reporting.

Closing Entry

A journal entry made at the end of an accounting period to transfer temporary accounts to permanent accounts and prepare the books for the next period.