Which of the Following Is a NOT an Assumption of the CAPM

question 45

Multiple Choice

Which of the following is a NOT an assumption of the CAPM?

• A) All investors have different expectations about expected returns, standard deviations, and correlation coefficients for all securities.
• B) All investors can borrow or lend money at the risk-free rate of return.
• C) There are no transaction costs.
• D) There are no personal income taxes so that investors are indifferent between capital gains and dividends.

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Definitions:

Saponification

A chemical reaction involving the hydrolysis of fats or oils by an alkali to produce glycerol and soap.

Ester Hydrolysis

A chemical reaction in which an ester is converted into its constituent alcohol and acid by the action of water or a hydroxide ion.

Major Product

The main product formed in a chemical reaction, which is generated in greater amounts compared to any other product.

Major Product

The chemical species that is formed in the largest amount from a chemical reaction, indicating the most favorable pathway under the given reaction conditions.