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:

Reasonable

Pertains to actions or decisions that are sensible, fair, and logical based on the circumstances presented.

Punitive

Relating to or aimed at punishment, especially within the context of punitive damages in legal judgments, intended to punish wrongful conduct and deter similar actions in the future.

CISG

An abbreviation for the United Nations Convention on Contracts for the International Sale of Goods, a treaty that governs international commercial transactions.

Avoided

In legal or contractual contexts, refers to actions or circumstances that render an agreement invalid or not enforceable.