Which of the Following Statements Regarding Errors in the CAPM

question 19

Multiple Choice

Which of the following statements regarding errors in the CAPM inputs is (are) true?

• A)Errors in equity premium estimates tend to be large and have a significant influence on the resultant hurdle rates.
• B)Errors in the risk-free rate tend to be insignificant.
• C)Errors in market-beta estimates tend to be modest.
• D)All of the above statements are true.

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Definitions:

Biological Causes

Refers to the physiological and genetic factors contributing to the development of diseases or health conditions.

Abnormality

A deviation from what is considered normal or typical, often used in a psychological or medical context to describe behaviors or conditions.

Nineteenth Century

The period of years from 1801 to 1900, inclusive, often marked by industrial, cultural, and social changes globally.

Operant Conditioning

A learning process in which the strength of a behavior is modified by reinforcement or punishment.