Based Upon the Capital Asset Pricing Model, an Asset Which

question 323

Multiple Choice

Based upon the capital asset pricing model, an asset which has more systematic risk than the market:

• A) Will earn a rate of return that is greater than the risk-free rate but less than the market rate.
• B) Will have a beta greater than 0 but less than 1.
• C) Should have a reward-to-risk ratio which is greater than that of the market.
• D) Should earn a rate of return which places it on the security market line.
• E) Should earn a rate of return which places it above the security market line.

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Definitions:

Fair Coin

A theoretical coin which has an equal chance of landing on heads or tails.

Observed Frequencies

The actual number of occurrences or instances of a variable category observed in a statistical sample.

Chi-squared Goodness-of-fit Test

A statistical test used to determine if observed data fits a theoretical distribution.

Rule of Five

A statistical rule of thumb asserting that if a sample size is large enough (n>30), the sample means will be normally distributed.