The ____ Is Often Used to Estimate the Required Rate

question 6

Multiple Choice

The ____ is often used to estimate the required rate of return for any firm with public traded stock.

• A) capital asset pricing model
• B) Treynor index
• C) Sharpe index
• D) B and C

---

Definitions:

Firm's Beta

A measurement of a company's stock market risk compared to the market as a whole; it quantifies the volatility or systemic risk of a firm's shares.

Industry Group

A classification of companies that conduct business activities in the same sector or segment of the economy.

Index Model

A statistical model used to predict the returns of assets based on the returns of a benchmark market index and the assets' sensitivities to that index.

Covariances

A measure of how two stocks move together, indicating the degree to which their returns are interdependent.