Assume the CAPM Is the Correct Asset Pricing Model $-0.200$

question 25

Multiple Choice

Assume the CAPM is the correct asset pricing model.An asset has a standard deviation of 30% and the market has a standard deviation of 20%.What would the correlation of the asset with the market need to be if the asset were to have the same expected return as the risk-free asset?

• A) \( -0.200 \)
• B) \( 0.000 \)
• C) \( 0.200 \)
• D) \( 0.300 \)

---

Definitions:

Merchandise Line

A merchandise line consists of a group of related products marketed under a single brand name, offered by the same company.

Limited-Service

Refers to businesses or offerings that provide a narrower range of services or products compared to full-service alternatives.

Full-Service

Refers to businesses or offerings that provide a complete range of services in their field without necessitating the customer to go elsewhere.

Retailer Classification

The categorization of retailers based on factors such as size, product assortment, pricing strategy, and location, to understand market dynamics better.