The Capital Asset Pricing Model (CAPM) States That the Expected

question 62

Multiple Choice

The Capital Asset Pricing Model (CAPM) states that the expected return on an asset depends upon its level of:

• A) systematic risk
• B) unsystematic risk
• C) standard deviation divided by its beta
• D) its beta divided by its standard deviation

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Definitions:

Mutually Exclusive Event

Situations or events that cannot occur at the same time, meaning the occurrence of one event precludes the occurrence of the other.

Independent Event

An independent event is an event whose outcome is not influenced by the outcome of another event; in probability, this means that the occurrence of one event does not change the probability of another.

Standardized Z Values

Values resulting from the standardization process that measures the number of standard deviations a data point is from the mean of its distribution.

Probability

An evaluation of event occurrence likelihood, represented as a numerical value ranging between 0 and 1.