All of the Following Are Assumptions of the Capital Asset

question 106

Multiple Choice

All of the following are assumptions of the Capital Asset Pricing Model (CAPM) except

• A) Investors can borrow and lend any amount at the risk-free rate.
• B) Investors all have homogeneous expectations regarding expected returns.
• C) Investors can have different time horizons, daily, weekly, annual, or some other period.
• D) All investments are infinitely divisible.
• E) Capital markets are in equilibrium.

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Definitions:

Inflow of Payments

The total amount of money coming into a firm, organization, or economy from various sources over a period of time.

Bretton Woods

Refers to the international monetary system established in 1944, which set up fixed exchange rates and established the International Monetary Fund (IMF) and the World Bank.

Monetary System

The set of mechanisms and institutions that a country uses to manage its money supply, including the minting of coins, printing of banknotes, and regulation of credit.

Exchange Rates

The value of one currency for the purpose of conversion to another, indicating how much of one currency can be exchanged for another currency.