In Practice Which Market Index Would Best Be Used as a Proxy

question 8

Multiple Choice

In practice which market index would best be used as a proxy for the market portfolio in the CAPM?

• A)S&P 500
• B)Dow Jones Industrial Average
• C)U.S.Treasury Bill
• D)Wilshire 5000

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Definitions:

Simple Interest Rate

A method of calculating interest where the interest charge is based on the original principal only.

Payments

Transfers of money in exchange for goods or services or as fulfillment of obligations under a contract.

Agreement

A mutual arrangement, typically in writing, between two or more parties detailing the terms and conditions of a deal or partnership.

Conditional Sale Contract

An agreement to sell an asset where the full payment is due after certain conditions have been met.