The Market Model Differs from the CAPM in That the Market

question 7

Multiple Choice

The Market Model differs from the CAPM in that the Market Model

• A) uses a riskfree return.
• B) uses the market portfolio.
• C) uses a market index.
• D) describes how prices are set.

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Definitions:

Pragmatic Theory

A theory in philosophy that evaluates theories or beliefs in terms of the success of their practical application.

Correspondence Theory

A theory in epistemology and philosophy of truth stating that the accuracy of a statement is determined by how accurately it corresponds to the real world or facts.

Rationality

The quality of being based on or in accordance with reason or logic, often applied to thought processes and decision-making.

True Beliefs

Convictions or acceptances that are in accordance with reality or facts.