The __________________ tells us that the expected return on a risky asset depends only on that asset's systematic risk.
A) Eﬃcient Markets Hypothesis (EMH).
B) Systematic risk principle.
C) Open Markets Theorem.
D) Law of One Price.
E) Principle of diversiﬁcation.

Question

Quizplus · Accepted Answer

The systematic risk principle, also known as the Capital Asset Pricing Model (CAPM), states that the expected return on a risky asset is determined by its systematic risk (market risk), and not its unsystematic (unique) risk. The other options listed do not directly relate to this principle.

The __________________ Tells Us That the Expected Return on a Risky