What Does It Mean When the CAPM Is Called "Robust

question 8

Multiple Choice

What does it mean when the CAPM is called "robust?"

• A) The CAPM requires no assumptions.
• B) Even if the CAPM's major assumptions are relaxed, most of its conclusions still hold.
• C) The CAPM is based on realistic assumptions.
• D) No other model can represent stock returns better than the CAPM.

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Definitions:

Price of Gasoline

The amount of money required to purchase a unit of gasoline, typically measured per gallon or liter.

Isocost Line

A graph line representing all combinations of inputs that have the same total cost.

Total Cost

The complete cost of production, including both fixed and variable costs, for a set level of output.

Capital

Those goods produced by the economic system that are used as inputs to produce other goods and services in the future.