Which one of the following must be equal for two individual securities with differing betas if those securities are correctly priced according to the capital asset pricing model?
A)standard deviation
B)rate of return
C)beta
D)risk premium
E)reward-to-risk ratio

Question

Quizplus · Accepted Answer

The reward-to-risk ratio must be equal for two individual securities if they are correctly priced according to the Capital Asset Pricing Model (CAPM), as it implies that investors are compensated for the risk they take, beyond the risk-free rate, in a way that is proportional to that risk.

Which One of the Following Must Be Equal for Two