In the Context of the CAPM and Assuming Investors' Past

question 32

True/False

In the context of the CAPM and assuming investors' past expectations have been fulfilled,the average historical market risk premium is a useful initial estimate of the expected future market risk premium.

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Definitions:

ROE

Return on Equity; a measure of financial performance calculated by dividing net income by shareholder's equity, indicating how well a company uses investments to generate earnings growth.

Sales

The total amount of goods or services sold by a company, a primary source of revenue for businesses.

Net Income

The profit of a company after all expenses, taxes, and deductions have been subtracted from total revenue.

Debt Ratio

A financial ratio that measures the proportion of a company's assets that are financed by debt.