Including Dividends as Part of the Yield in the CAPM

question 17

Multiple Choice

Including dividends as part of the yield in the CAPM would tend to

• A) decrease beta.
• B) decrease alpha.
• C) increase alpha.
• D) have no effect on alpha or beta.

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, typically expressed in years.

Bond Convexity

A measure of the curvature or the degree of the curve in the relationship between bond prices and bond yields, demonstrating how the duration of a bond changes as the interest rate changes.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, expressed as an annual rate.

Price Volatility

The rate at which the price of a security increases or decreases for a given set of returns, often measured by the standard deviation of historical returns.