In the Capital Asset Pricing Model, which of the following factors are used to determine the required rate of return?
I. the risk-free interest rate
II. future cash flows
III. expected return on the market portfolio
IV. beta
A) I and II only
B) I, II and III only
C) II, III and IV only
D) I, III and IV only

Question

Quizplus · Accepted Answer

The Capital Asset Pricing Model (CAPM) determines the required rate of return based on the risk-free interest rate (I), the expected return on the market portfolio (III), and the beta of the investment (IV), which measures its sensitivity to market movements. Future cash flows (II) are not directly used in the CAPM formula.

In the Capital Asset Pricing Model, Which of the Following