In the context of the Capital Asset Pricing Model (CAPM), the relevant risk is
A) unique risk.
B) systematic risk.
C) standard deviation of returns.
D) variance of returns.

Question

Quizplus · Accepted Answer

In the context of the Capital Asset Pricing Model (CAPM), the relevant risk is systematic risk. Systematic risk, also known as market risk, is the type of risk that affects all investments across the market and cannot be diversified away. CAPM focuses on this risk to determine the expected return on an asset, given its sensitivity to market movements, represented by beta.

In the Context of the Capital Asset Pricing Model (CAPM)