Use the Following Three Statements to Answer This Question

question 15

Multiple Choice

Use the following three statements to answer this question:

• A) I, II and III are correct.
• B) I and II are incorrect, III is correct.
• C) I, II are correct, III is incorrect.
• D) I, III are incorrect, II is correct.
• I.The CAPM points out that rational investors should be compensated for unique risk.
• II.The CAPM implies that non-systematic risk is the appropriate measure of risk to determine the risk premium required by investors for holding a risky security.
• III.The expected return from non-systematic risk is zero.

---

Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Dividend

A share of a company's profits distributed to its shareholders, usually paid in cash or additional stocks.

Convertible Preferred Stock

A type of preferred stock that holders can convert into a specified number of shares of common stock.

Common Stock

A form of corporate equity ownership, a type of security representing an ownership share in a corporation, where holders benefit from company profits and voting rights.