The Capital Asset Pricing Model

question 69

Multiple Choice

The capital asset pricing model:

• A) expresses a linear relationship between returns on individual stocks and the market over time.
• B) can be used to examine common stock returns but not the risk of the stock.
• C) is not very useful because it is unrealistically a linear model.
• D) is a linear model used to evaluate risk free rate.

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Definitions:

Vertices

The plural of vertex, referring to the corners or intersecting points of geometric shapes or graphs.

Hyperbola

A type of smooth curve lying in a plane, consisting of two branches, which are mirror images of each other, and asymptotically approaching fixed lines.

Asymptotes

Asymptotes are lines that a graph approaches but never reaches, illustrating behavior towards infinity or certain points within the domain.

Vertices

Vertices are the corner points where two or more lines, edges, or curves meet.