The Basic Tenet of the CAPM Is That a Stock's

question 95

Multiple Choice

The basic tenet of the CAPM is that a stock's expected risk premium should be:

• A)Greater than the expected market return
• B)Proportionate to the market risk premium
• C)Proportionate to the stock's Beta
• D)Greater than the risk-free rate of return

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Definitions:

Inferior Good

A category of product that sees a decline in demand when consumer income rises.

Inversely Related

A term describing two variables that move in opposite directions; as one increases, the other decreases.

Inferior Good

A type of good for which demand decreases as the income of individuals increases, inversely related to the financial well-being of the consumer.

Tuna Fish Sandwiches

A type of sandwich made primarily from canned tuna fish and other ingredients such as mayonnaise and celery.