Which of the Following Are Assumptions of the Capital Asset

question 4

Multiple Choice

Which of the following are assumptions of the capital asset pricing model?

• A)Funds can be borrowed or lent in unlimited quantities at risk-free rate
• B)The objective of all investors is to maximize their expected utility over the same one-period time frame using the same basis for evaluating investments
• C)There are no taxes or transaction costs associated with any investment
• D)All of the above are correct assumptions

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Definitions:

Expected Revenue

The predicted amount of money that a business will receive from its sales over a certain period, usually calculated by multiplying expected sales by the price of goods or services.

Probability

A numerical representation between 0 and 1 that indicates the likelihood of an event transpiring.

Reservation Price

Reservation price is the maximum price a consumer is willing to pay for a product or service.

English Auction

A common auction format where the price starts low and is bid upward, with the highest bid at the end of the auction winning.