All of the Following Are Underlying Assumptions of the Capital

question 54

Multiple Choice

All of the following are underlying assumptions of the capital asset pricing model (CAPM) except:

• A) A large number of profit-maximizing participants analyze and value securities.
• B) New information enters the market in a random fashion
• C) Security prices adjust rapidly to reflect the effect of new information
• D) Expected returns implicit in the current price of the security reflect its risk
• E) All of the above are assumptions of the CAPM