Although the CAPM Is Intuitively Appealing in That It Relates

question 170

Multiple Choice

Although the CAPM is intuitively appealing in that it relates risk and return in a straightforward manner, the model's predictive value is often challenged because:

• A)statistical tests have not been conclusive in validating the relationship between beta and return proposed by the CAPM.
• B)the CAPM only addresses unsystematic risk, not market risk.
• C)beta measures only the stock's coefficient of business-specific risk.
• D)All of the above

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Definitions:

Cash Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Indirect Method

A cash flow statement presentation technique where net income is adjusted for changes in balance sheet accounts to calculate operating cash flow.

Indirect Method

A technique used in cash flow statement preparation where net income is adjusted for non-cash transactions to calculate operating cash flows.

Cash Dividends

Payments made by a corporation to its shareholder members from earnings, typically in the form of cash.