Using the Capital Asset Pricing Model, the Cost of Common

question 116

Multiple Choice

Using the capital asset pricing model, the cost of common stock equity is the return required by investors as compensation for

• A) the specific risk of the firm.
• B) the firm's diversifiable risk.
• C) price volatility of the stock.
• D) the firm's nondiversifiable risk.

---

Definitions:

Chinese Descent

Refers to individuals whose ancestors originated from China, possessing cultural, genetic, or national ties to the country.

European Descent

Referring to people whose ancestral origins are found in Europe.

Ambiguous Faces

Visual stimuli that can be interpreted in more than one way and are often used in psychological experiments to study perception and emotion.

Outgroup Homogeneity

The perception that members of an outgroup are more similar to each other than they actually are, as compared to the ingroup's diversity.