Which of the following is the best representation of the CAPM model? A) k_p= RFR - (k_m+ RFR) x b_p B) k_p= RFR + (k_m+ RFR) x b_p C) k_p= RFR + (k_m- RFR) x b_p D) k_p= RFR - (k_m- RFR) x b_p

Question

Quizplus · Accepted Answer

The CAPM (Capital Asset Pricing Model) formula is represented as the expected return of an investment equals the risk-free rate plus the beta of the security times the expected market return minus the risk-free rate. Choice C correctly represents this formula by showing the expected return equals the risk-free rate plus the difference between the expected market return and the risk-free rate, all multiplied by the beta of the security.

Which of the Following Is the Best Representation of the CAPM