If the Simple CAPM Is Valid and All Portfolios Are

question 60

Multiple Choice

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.

• A) Option A
• B) Option B
• C) Option C
• D) Option D

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Definitions:

Dutch Auction

A method of auction in which the price of the item is reduced until it meets a bid.

Shares

Portions of ownership in a corporation or financial asset.

Dutch Auction

An auction model where the price of the item is lowered until it finds a buyer, commonly used for selling financial securities.

Shares

Equities in a corporation or financial asset, these units grant holders a proportional claim on profits via dividends, should they be distributed.