According to the Capital Asset Pricing Model:
A)the expected return on a security is negatively and non-linearly related to the security's
Beta.
B)the expected return on a security is negatively and linearly related to the security's beta.
C)the expected return on a security is positively and linearly related to the security's
Variance.
D)the expected return on a security is positively and non-linearly related to the security's
Beta.
E)the expected return on a security is positively and linearly related to the security's beta.

Question

Quizplus · Accepted Answer

According to the Capital Asset Pricing Model, the expected return on a security is positively and linearly related to the security's beta. This means that as a security's beta increases, its expected return will also increase in a linear fashion. This relationship is commonly known as the beta risk premium.