Which of the Following Is a Disadvantage of CAPM

question 8

Multiple Choice

Which of the following is a disadvantage of CAPM?

• A)It assumes that investors are indifferent to risk and return.
• B)It does not capture all the relevant risk factors in the economy.
• C)It ignores systematic risk.
• D)It assumes that no two securities have significant correlation.

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Definitions:

Real Per Capita Output

The amount of goods and services produced per person, adjusted for inflation, indicating the economic well-being of a country's citizens.

DVC

Digital Video Compression, a method for reducing the size of digital video files.

Economic Growth

An increase in the production of goods and services in an economy over a period of time, often measured by the rise in the country's gross domestic product (GDP).

Industrially Advanced Countries

High-income countries such as the United States, Canada, Japan, and the nations of western Europe that have highly developed market economies based on large stocks of technologically advanced capital goods and skilled labor forces.