The traditional capital asset pricing model requires several assumptions in addition to an assumption of perfect markets. Which of the following is not one of these assumptions?
A) asset returns are certain
B) everyone can borrow and lend at the risk-free rate of interest
C) investors have homogeneous expectations
D) investors want more nominal return and less risk in their functional currency
E) nominal returns are normally distributed

Question

Quizplus · Accepted Answer

The traditional capital asset pricing model assumes uncertainty in asset returns, not certainty. The other assumptions listed are part of the traditional CAPM.

The Traditional Capital Asset Pricing Model Requires Several Assumptions in Addition