The Expected Return-Beta Relationship

question 37

Multiple Choice

The expected return-beta relationship

• A)is the most familiar expression of the CAPM to practitioners.
• B)refers to the way in which the covariance between the returns on a stock and returns on the market measures the contribution of the stock to the variance of the market portfolio, which is beta.
• C)assumes that investors hold well-diversified portfolios.
• D)All of the options are true.
• E)None of the options is true.

---

Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices over a given period of time.

Perfectly Elastic

A market condition where demand or supply responds infinitely at a particular price level and zero elsewhere.

Elastic

Describes a situation where the demand for a good or service significantly changes in response to price changes, indicating sensitivity to price.

Midpoint Method

is a technique in economics used to calculate the elasticity of demand or supply, providing a more accurate measure by averaging the starting and ending points.