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:

Encode

The process of converting information into a form that can be stored in memory, such as transforming a visual image into a memorable experience or a thought into language.

Sensory Experiences

Perceptions or interactions with the environment through the senses, such as sight, hearing, smell, taste, and touch.

Traumatic Experiences

Events or situations that cause psychological trauma due to their intense stress and the feeling of being overwhelmed.

Children

Individuals in the early stages of human development, typically considered to be from birth to adolescence.