A Short-Term T-Bill's Rate of Return Should Be Used in the CAPM

question 56

True/False

A short-term T-bill's rate of return should be used in the CAPM formula to determine the cost of equity capital regardless of the length of the project under consideration.

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Definitions:

Z-Test Approximation

A statistical method used to determine if there is a significant difference between a sample mean and a population mean, applicable when the sample size is large and the population variance is known.

Matched-Pairs Sampling

A sampling technique in which subjects are paired based on certain characteristics, and each pair is treated differently to examine the effect of a variable, minimizing variability among subjects.

Wilcoxon Signed-Rank Test

A non-parametric statistical test used to compare two related samples, matched samples, or repeated measurements on a single sample.

Nonzero Differences

Refers to the differences between paired observations that are not equal to zero, often considered in statistical tests like the Wilcoxon Signed-Rank Test.