The _____ tells us that the expected return on a risky asset depends only on that asset's nondiversiﬁable risk.
A)Eﬃcient Markets Hypothesis (EMH)
B)Systematic Risk Principle
C)Open Markets Theorem
D)Law of One Price
E)Principle of Diversiﬁcation

Question

Quizplus · Accepted Answer

The Systematic Risk Principle, also known as the Capital Asset Pricing Model (CAPM), is based on the idea that the expected return of a risky asset is solely determined by the level of systemic or market risk it possesses, which cannot be diversifiable. This principle is used to determine the appropriate rate of return on an investment given its risk, and is widely used in investment management and financial analysis.

The _____ Tells Us That the Expected Return on a Risky