Which of the Following Are Assumptions of the Simple CAPM

question 19

Multiple Choice

Which of the following are assumptions of the simple CAPM model?
I. Individual trades of investors do not affect a stock's price.
II. All investors plan for one identical holding period.
III. All investors analyze securities in the same way and share the same economic view of the world.
IV. All investors have the same level of risk aversion.

• A) I, II, and IV only
• B) I, II, and III only
• C) II, III, and IV only
• D) I, II, III, and IV

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Definitions:

Market Price

The present rate at which a service or asset is available for purchase or sale on an open market.

Dividends

Disbursements issued by a corporation to its owners, often in the form of profit sharing.

Price-Earnings Ratio

A valuation metric for stocks, calculated by dividing the market price per share by the earnings per share.

Market Price

The present rate at which a service or asset is available for purchase or sale on the public market.