If You Plotted the Returns of a Company Against Those

question 38

True/False

If you plotted the returns of a company against those of the market and found that the slope of your line was negative, the CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor, assuming that the observed relationship is expected to continue in the future.

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Definitions:

Interest Rate

The percentage of an amount of money charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage rate.

Investment Tax Credit

A fiscal policy tool used to encourage companies to invest by providing a tax rebate on their investments.

Equilibrium

A state in a market where supply equals demand, and there is no incentive for price to change, leading to market stability.

Interest Rate

A lender's charge to a borrower, represented as a percentage of the principal amount, for the privilege of borrowing assets.