The Capital Asset Pricing Model (CAPM) Is a Mathematical Model

question 2

Multiple Choice

The Capital Asset Pricing Model (CAPM) is a mathematical model that depicts the

• A) positive relationship between risk and return.
• B) standard deviation between a risk premium and an investment's expected return.
• C) exact price that an investor should be willing to pay for any given investment.
• D) difference between a risk-free return and the expected rate of inflation.

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Definitions:

Consideration

Consideration is something of value exchanged between parties in a contract that makes the agreement legally binding.

Ethical Obligation

A moral responsibility to act in accordance with ethical principles.

Firm Offer

A legal concept in contract law where an offeror is bound to keep an offer open for a specified period, making it irrevocable even without consideration.

Promissory Estoppel

A legal principle that prevents a party from withdrawing a promise made to another when the latter has relied on that promise to their detriment.