Even Though Many of the CAPM Assumptions Are Violated in the Real

question 13

Multiple Choice

Even though many of the CAPM assumptions are violated in the real world which of the following provides a reason to use the model in investment decisions?

• A) the efficient set must be the same for all investors
• B) the amount of risk free lending or borrowing undertaken will be the same
• C) every investor has the same expectations with regards to expected returns and risks for available securities
• D) everyone faces the same risk free rate

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Definitions:

Financial Wellbeing

The state of being financially healthy, where one has control over finances, the ability to absorb a financial shock, and the freedom to make choices that allow enjoyment of life.

Physical Attractiveness

The degree to which a person's physical traits are considered aesthetically pleasing or beautiful by others.

Similarity

The extent to which two things are alike or share common characteristics.

Contact

The act or state of physical touching or being in close proximity, or the initiation of communication between individuals.