Using the Capital Asset Pricing Model (CAPM), a Decrease in the Risk

question 159

True/False

Using the Capital Asset Pricing Model (CAPM), a decrease in the risk premium will increase the expected rate of return on an individual security. Assume that the security's beta, the risk-free rate of return, and the market rate of return are all positive.

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Definitions:

Independent Thinking

The ability to analyze and evaluate information or situations in order to form a judgment independently from external influence.

Type A Personality

A rephrased definition: A behavioral pattern characterized by a highly competitive nature, aggression, impatience, and a constant sense of urgency.

Ability to Relax

The capacity or skill of being able to rest, unwind, and reduce stress effectively.

Hostile

Showing or feeling opposition or dislike; unfriendly or antagonistic.