According to the capital asset pricing model, the required return by investors on a security is
A)inversely related to the risk-free rate.
B)inversely related to the firm's beta.
C)inversely related to the market return.
D)None of these are correct.

Question

Quizplus · Accepted Answer

The Capital Asset Pricing Model (CAPM) posits that the required return on a security is directly related to its beta (which measures the security's volatility relative to the market), the risk-free rate, and the expected market return. It does not suggest an inverse relationship with any of these factors.

According to the Capital Asset Pricing Model, the Required Return