Which of the Following Is Correct Regarding the CAPM

question 239

Multiple Choice

Which of the following is correct regarding the CAPM?

• A) The expected return for a particular asset depends on the pure time value of money as measured by beta.
• B) The expected return for a particular asset depends on the amount of systematic risk as measured by the risk free rate.
• C) The standard deviation for a particular asset depends on the reward for bearing risk as measured by beta.
• D) Implicit in the CAPM is that all risky assets have the same reward to risk ratio.
• E) The SML and CAPM illustrate that the higher the beta, the lower the expected return.

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Definitions:

Components

The parts or elements that make up a larger system, product, or structure.

Contract Employee

An individual hired to perform a specific job or task for a designated period, not considered a permanent or long-term employee of the company.

Salaried Employee

An employee who receives a fixed amount of compensation from an employer regularly, typically on a monthly or bi-weekly basis.

Homemaker

An individual responsible for managing household tasks and caring for the family, without receiving formal wages.