Which of the Following Is NOT an Assumption Used in Deriving

question 32

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 averse preferences toward taking on risk.
• C) Investors hold only efficient portfolios of traded securities; that is, 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 costs and can borrow and lend at the risk-free interest rate.

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Definitions:

Social Group

A collection of individuals who interact with each other based on shared interests, backgrounds, or purposes forming a cohesive unit.

Looking Glass Self

A concept in sociology that suggests an individual's self-concept is shaped by how they believe others perceive them.

Objective Reality

Refers to the existence of an external, independent reality that is not influenced by individual perceptions or beliefs.

Computer-Mediated Communication

Any form of communication between individuals that occurs through the use of two or more electronic devices.