The capital asset pricing model suggests that the required return on a firm's stock is a positive function of:
A)the risk-free rate of interest.
B)the market rate of return.
C)the stock's beta.
D)all of the above

Question

The capital asset pricing model suggests that the required return on a firm's stock is a positive function of:​
A)the risk-free rate of interest.
B)the market rate of return.
C)the stock's beta.
D)all of the above

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) suggests that the required return on a firm's stock depends on three factors: the risk-free rate of interest, the market rate of return, and the stock's beta. Therefore, all of the given options (A, B, and C) are positively related to the required return on a firm's stock, and hence the best choice is D.

The Capital Asset Pricing Model Suggests That the Required Return