According to the Capital Asset Pricing Model, the Required Return

question 16

Multiple Choice

According to the capital asset pricing model, the required return by investors on a security is

• A) inversely related to the risk-free rate.
• B) inversely related to the firm's beta.
• C) inversely related to the market return.
• D) none of the above

---

Definitions:

Net Present Value

A financial analysis method used to determine the overall value of a projected investment or project by calculating the present value of expected future cash flows.

Operating Cash Flow

Measures the cash generated by a company's normal business operations.

Degree of Sensitivity

Refers to the responsiveness measure of how a dependent variable such as demand or price reacts to changes in an independent variable.

Net Present Value

The calculation that compares the value of money today to the value of that same money in the future, taking inflation and returns into account.