Both the CAPM and APT Suggest That an Asset Should

question 38

Multiple Choice

Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return

• A)when it has a greater systematic risk.
• B)when it has a greater risk in isolation.
• C)when it has a lower systematic risk.
• D)when it has a lower systematic risk and a lower risk in isolation.

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Definitions:

"Goodness Of Fit"

A statistical measure that evaluates how well a model or hypothesis matches observed data or outcomes.

Pay Range

The spectrum of wages set by an organization for a specific job or role, establishing the minimum and maximum salary for positions.

Pay Grade

A classification system that determines the level of compensation for jobs based on their responsibilities, complexity, and required qualifications.

Maximum Pay Rate

The top limit on the amount of compensation an employee can receive for their position within an organizational pay structure.