Which of the Following Is Consistent with the CAPM and Efficient

question 12

Multiple Choice

Which of the following is consistent with the CAPM and efficient capital markets?

• A)A security with a beta of 1 has a return last year of 8% when the market has a return of 12%.
• B)Small stocks with a beta of 1.5 tend to have higher returns on average than large stocks with a beta of 1.5.
• C)A security with only diversifiable risk has an expected return that exceeds the risk-free interest rate.
• D)A security with only systematic risk has an expected return that exceeds the risk-free interest rate.

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Definitions:

Power Distance

A cultural dimension that describes the extent to which less powerful members of society accept and expect power to be distributed unequally.

Polychronic Cultures

Cultures that manage multiple tasks simultaneously and view time as more fluid and less structured.

French Nationals

Citizens of France, either by birth or naturalization.

Handshake

A traditional greeting or agreement where two people grip and shake each other's hands.