A Criticism of the CAPM Is That It

question 20

Multiple Choice

A criticism of the CAPM is that it:

• A)ignores the return on the market portfolio.
• B)ignores the risk-free return.
• C)requires a single measure of systematic risk.
• D)utilizes too many factors.
• E)None of the above.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not factor into future decision making.

Sunk Cost

Costs that have already been incurred and cannot be recovered or changed.

Make or Buy

A decision-making process in which a company chooses between manufacturing a product internally or purchasing it from an external supplier.

Significant Sunk Costs

Expenses that have already been incurred and cannot be recovered or changed.