CAPM Says: (Nominate the Incorrect Statement)

question 14

Multiple Choice

CAPM says: (nominate the incorrect statement) :

• A) the expected return on a share is equal to the risk-free rate plus the amount of beta multiplied by the risk premium.
• B) if investors wish to buy a particular share, the expected return must, at least, be equal to the return they would earn if they invested in a risk-free asset.
• C) investors need to be compensated for taking risk, they will not be compensated for total risk, just the unsystematic risk.
• D) beta and the risk premium multiplied together, plus the risk-free rate, provide the expected return of the share.

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Definitions:

Abbreviation

A shortened form of a word or phrase used to save space or time, common in various fields including medicine and communication.

QID

An abbreviation in medical prescriptions indicating medication should be taken four times a day.

Legibly

In a manner that is clear enough to read; the quality of being easily readable by others.

Strength

The capacity of an object or individual to withstand great force or pressure, often measured in terms of physical power or durability.