The Capital Asset Pricing Model Asserts That the Expected Return

question 89

Multiple Choice

The Capital Asset Pricing Model asserts that the expected return ________.

• A) is equal to the risk-free rate plus a risk premium for unsystematic risk
• B) is equal to the risk-free rate plus a risk premium for systematic risk
• C) is equal to the risk premium plus a risk-free rate for systematic risk
• D) is equal to the risk premium plus a risk-free rate for unsystematic risk

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Definitions:

Optimum

The most favorable condition or level for growth, reproduction, or success.

Socially Optimal

The point at which the benefits to society of an action, policy, or project, are maximized, taking into account all costs and benefits.

MSB and MSC

Marginal Social Benefit (MSB) and Marginal Social Cost (MSC) refer to the additional benefit or cost to society of producing one more unit of a good or service.

Pollution

The introduction of contaminants into the natural environment, causing adverse changes and harm to ecosystems and human health.