The Main Shortcoming of the CAPM Is That It

question 24

Multiple Choice

The main shortcoming of the CAPM is that it:

• A)ignores the return on the market portfolio.
• B)uses too many factors.
• C)requires only a single measure of systematic risk.
• D)ignores the risk-free rate of return.

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Definitions:

Implied-in-fact Contract

is an agreement derived from the actions, conduct, or circumstances of the parties involved, rather than from explicit written or spoken terms.

Negotiable Instrument

An official document that assures the payment of a fixed sum of money, payable either on demand or at a designated time, with the document bearing the name of the person obligated to pay.

Letter of Credit

A financial document issued by a bank that guarantees a buyer's payment to a seller within a specified timeframe.

Certificate of Deposit

A time-bound deposit held at a bank or financial institution that offers a fixed rate of interest.