According to the Capital Asset Pricing Model (CAPM),which of the Following

question 21

Multiple Choice

According to the capital asset pricing model (CAPM) ,which of the following is true?

• A)The expected return on an asset is equal to the risk-free rate plus the amount of risk, beta, multiplied by the market risk premium.
• B)The expected return on an asset is equal to the market rate plus the amount of risk, beta, multiplied by the market risk premium.
• C)The expected return on an asset is equal to the risk-free rate plus the amount of risk, standard deviation, multiplied by the market risk premium.
• D)None of the above.

---

Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing owners' claims on the company's resources.

Increase Assets

The process by which a company's resources, valuable to its operations and financial growth, are augmented or enlarged.

Decrease Assets

A reduction in the total value of assets owned by an entity, occurring through expenses, losses, asset disposals, or using up assets in operations.

Financial Statement

Formal records of the financial activities and position of a business, person, or other entity, which include the balance sheet, income statement, and cash flow statement.