In the context of the Capital Asset Pricing Model (CAPM), the relevant risk is
A) unique risk.
B) market 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 market risk. This is because CAPM is based on the premise that only non-diversifiable risk (market risk) is rewarded in the marketplace, and diversifiable risk (unique risk) can be eliminated through diversification.

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