Which of the Following Best Describes the Capital Asset Pricing

question 6

Multiple Choice

Which of the following best describes the capital asset pricing model?

• A) Determines the amount of capital that is needed in particular situations
• B) Is used to determine the price of futures contracts
• C) Relates the return on an asset to the return on a stock index
• D) Is used to determine the volatility of a stock index

---

Definitions:

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or rights to ownership (derivatives).

Ownership

The legal right to possess, use, control, and dispose of property or an item.

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and a claim on its profits.

Corporation

A legal entity recognized by law as separate from its owners, with its own rights, privileges, and liabilities.