All of the Following Are Assumptions of the Capital Asset

question 106

Multiple Choice

All of the following are assumptions of the Capital Asset Pricing Model (CAPM) except

• A) Investors can borrow and lend any amount at the risk-free rate.
• B) Investors all have homogeneous expectations regarding expected returns.
• C) Investors can have different time horizons, daily, weekly, annual, or some other period.
• D) All investments are infinitely divisible.
• E) Capital markets are in equilibrium.

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Definitions:

Accrual Accounting

An accounting method where revenue and expenses are recorded when they are earned or incurred, respectively, regardless of when the cash is actually exchanged.

Operating Performance

A measure of a firm's efficiency in managing its core business operations, often evaluated using metrics such as operating margin and revenue growth.

Accrual Accounting

A method of accounting that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Economic Performance

A measure of how well an entity manages its resources to produce goods and services, often evaluated through factors like GDP growth, employment levels, and productivity.