The Capital Asset Pricing Model Asserts That the Expected Return

question 89

Multiple Choice

The Capital Asset Pricing Model asserts that the expected return ________.

• A) is equal to the risk-free rate plus a risk premium for unsystematic risk
• B) is equal to the risk-free rate plus a risk premium for systematic risk
• C) is equal to the risk premium plus a risk-free rate for systematic risk
• D) is equal to the risk premium plus a risk-free rate for unsystematic risk

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Definitions:

Annual Costs

The total expenses incurred by an individual or organization over the course of a year.

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, considering the risk involved.

Customized Machine

A piece of equipment specifically designed and built to meet the unique requirements of a particular business or manufacturing process.

Operating

Pertains to the ongoing, day-to-day activities involved in running a business or an organization.