Which of the Following Is Not an Assumption Used in Deriving

question 109

Multiple Choice

Which of the following is not an assumption used in deriving the Capital Asset Pricing Model (CAPM) ?

• A) Investors have homogeneous expectations regarding the volatilities, correlation, and expected returns of securities.
• B) Investors have homogeneous risk adverse preferences toward taking on risk.
• C) Investors hold only efficient portfolios of traded securities that are portfolios that yield the maximum expected return for the given level of volatility.
• D) Investors can buy and sell all securities at competitive market prices without incurring taxes or transactions cost and can borrow and lend at the risk-free interest rate.

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Definitions:

Endless Chain

A sales technique where current customers are used to generate leads for future sales by asking for referrals to new prospects.

Gutter Products

Items designed for the management and diversion of rainwater away from a building to protect its structure.

Customer Refers

The act of existing customers recommending or mentioning a business's products or services to potential new customers.

Center of Influence

An individual or group that has significant impact or sway within a specific community or market, often utilized in marketing and networking strategies.