According to the Capital Asset Pricing Model, Which of the Following

question 88

Multiple Choice

According to the capital asset pricing model, which of the following will increase the expected rate of return on a security that has a beta that is less than that of the market? Assume the market rate of return is greater than the risk-free rate and both rates are positive.
I. increase in the risk-free rate
II. decrease in the risk-free rate
III. increase in the market risk premium
IV. decrease in the market rate of return

• A)I and III only
• B)II and III only
• C)I and IV only
• D)II and IV only
• E)II, III, and IV only

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Definitions:

Frequency

The rate at which a vibration occurs that constitutes a wave, either in a material (as in sound waves), or in an electromagnetic field (as in radio waves and light).

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An influential American psychologist known for his work in behaviorism, particularly the development of the theory of operant conditioning.

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A learning process through which the strength of a behavior is modified by reward or punishment.

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