The Capital Asset Pricing Model Suggests That the Required Return

question 18

Multiple Choice

The capital asset pricing model suggests that the required return on a firm's stock is a positive function of:

• A) the risk-free rate of interest.
• B) the market rate of return.
• C) the stock's beta.
• D) all of the above

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Definitions:

Standard Deviation

a statistic that measures the dispersion of a dataset relative to its mean, indicating how spread out the numbers are.

Gas Stations

Retail establishments that sell fuel and often other services or goods for motor vehicles.

Significance Level

the probability of rejecting the null hypothesis when it is true, used as a criterion for deciding the outcome of a statistical test.

Car Engine

A machine designed to convert various forms of energy into mechanical force and motion, powering automobiles.