The CAPM Is Built on Historic Conditions, Although in Most

question 59

True/False

The CAPM is built on historic conditions, although in most cases we use expected future data in applying it.Because betas used in the CAPM are calculated using expected future data, they are not subject to changes in future volatility.This is one of the strengths of the CAPM.

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Definitions:

Dividend Payouts

The portion of a company's earnings that is distributed to shareholders in the form of cash or additional shares.

Accounts Receivable

Outstanding payments from customers to a firm for received goods or services that remain unpaid.

Financial Plan

A comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans.

Shareholder Wealth

The total value of an individual's ownership stake in a publicly traded corporation, often measured in terms of stock price appreciation plus dividends received.