The capital asset pricing model suggests that the required return on a firm's stock is a positive function of:
A) the risk-free rate of interest.
B) the market rate of return.
C) the stock's beta.
D) All of these are correct.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) suggests that the required return on a firm's stock is determined by three factors: the risk-free rate of interest, the market rate of return, and the stock's beta. Therefore, all three options (A, B, and C) are correct.

The Capital Asset Pricing Model Suggests That the Required Return