The key assumption of the capital asset pricing model is that an investor cares only about his portfolio's
A) degree of diversification.
B) expected income.
C) level of risk.
D) expected return and standard deviation.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) assumes that investors are rational and risk-averse, caring primarily about two aspects of their portfolio: expected return and the standard deviation of return, which represents risk. This model focuses on optimizing these two parameters to achieve the best possible portfolio performance.

The Key Assumption of the Capital Asset Pricing Model Is