According to the Capital Asset Pricing Model (CAPM), Which One

question 44

Multiple Choice

According to the Capital Asset Pricing Model (CAPM) , which one of the following statements is NOT true?

• A)The expected rate of return of a security decreases proportionally with a decrease in the risk-free rate.
• B)The expected rate of return of a security increases as its beta increases.
• C)A fairly priced security has an alpha of zero.
• D)In equilibrium, all securities lie on the security market line.

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Definitions:

Cognitive Dissonance

The mental discomfort experienced by a person who holds two or more contradictory beliefs, ideas, or values at the same time.

Psychological Tension

A state of mental or emotional strain, often resulting from challenging or demanding circumstances.

Attributions

Explanations that individuals create for the causes of their own and others' behaviors and events.

Fundamental Attribution Error

The tendency to overemphasize personality-based explanations for behaviors observed in others while underestimating the influence of situational factors.