In the Context of the Capital Asset Pricing Model (CAPM)the

question 158

Multiple Choice

In the context of the Capital Asset Pricing Model (CAPM) the relevant risk is

• A)unique risk.
• B)market risk.
• C)standard deviation of returns.
• D)variance of returns.
• E)none of the above.

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Definitions:

Annual Net Cash Flows

The amount of cash that a company generates or uses in a given year after all income and expenses are accounted for.

Average Rate of Return

A financial ratio that represents the average net profit or return expected on an investment over its lifetime, expressed as a percentage.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, dividing its cost minus salvage value by its useful life, resulting in equal annual depreciation expenses.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculating the difference between the present value of cash inflows and outflows.