The Capital Asset Pricing Model (CAPM) Assumes Which of the Following

question 93

Multiple Choice

The capital asset pricing model (CAPM) assumes which of the following?
I. A risk-free asset has no systematic risk.
II. Beta is a reliable estimate of total risk.
III. The reward-to-risk ratio is constant.
IV. The market rate of return can be approximated.

• A) I and III only
• B) II and IV only
• C) I, III, and IV only
• D) II, III, and IV only
• E) I, II, III, and IV

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Definitions:

Cultural Standards

Norms and expectations that a specific culture establishes and upholds, which guide behavior, attitudes, and values within that culture.

Sense of Self

An individual's consciousness of their own identity and personality, which includes their thoughts, experiences, values, and beliefs about who they are.

Freudian Theory

A psychological theory developed by Sigmund Freud that emphasizes the importance of unconscious mental processes, sexual and aggressive drives, and early childhood experiences in shaping personality and behavior.

Immediate Gratification

The desire to experience pleasure or fulfillment without delay or deferment, often prioritizing short-term rewards over long-term goals.