Which of the Following Is not a Relaxation of the Assumptions

question 23

Multiple Choice

Which of the following is not a relaxation of the assumptions for the CAPM?

• A) Differential lending and borrowing rates
• B) A zero beta model
• C) Transaction costs
• D) Taxes
• E) Homogeneous expectations and fixed planning periods

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Definitions:

Simple Interest

Interest calculated only on the principal amount, or the initial sum of money invested or loaned.

Market Rate

The prevailing interest rate available in the marketplace for investments, loans, and deposits.

Simple Interest

Interest calculated only on the principal amount, or the original sum of money lent or invested, without compounding.

Savings Account

A deposit account held at a bank or other financial institution that provides modest interest income.