The Capital Asset Pricing Model (CAPM)includes Which of the Following

question 49

Multiple Choice

The Capital Asset Pricing Model (CAPM) includes which of the following in its base assumptions?
I.Investors should earn a minimum return equal to the risk-free rate.
II.Investors in the market should earn a return greater than the return on the overall market.
III.Investors should be rewarded for the amount of risk they assume.
IV.Investors should earn a return located above the Security Market Line.

• A)I and III only
• B)II and IV only
• C)I, II and III only
• D)I, III and IV only

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Definitions:

Marginal Costs

The additional cost incurred by producing one extra unit of a product or service, crucial for understanding economic efficiency and pricing.

Variable Costs

Expenses that vary directly with the level of production or output.

Long-Run Average Total Cost

The average cost per unit of output where all inputs are considered variable, calculated over a period where firms can adjust all factors of production.

Short-Run Marginal Cost

The cost incurred by producing one additional unit of a product or service in the short run, where some factors are fixed.