According to the capital asset pricing model (CAPM),which of the following is true?
A)The expected return on an asset is equal to the risk-free rate plus the amount of risk, beta, multiplied by the market risk premium.
B)The expected return on an asset is equal to the market rate plus the amount of risk, beta, multiplied by the market risk premium.
C)The expected return on an asset is equal to the risk-free rate plus the amount of risk, standard deviation, multiplied by the market risk premium.
D)None of the above.

Question

Quizplus · Accepted Answer

According to the capital asset pricing model (CAPM), the expected return on an asset is equal to the risk-free rate plus the amount of risk, beta, multiplied by the market risk premium. This is represented by the equation: E(R) = Rf + β(E(Rm) - Rf), where E(R) is the expected return, Rf is the risk-free rate, β is the asset's beta, E(Rm) is the expected return on the market portfolio, and E(Rm) - Rf is the market risk premium. Therefore, option A is the correct option. Options B and C are incorrect as they do not include the beta risk factor. Option D is incorrect as there is a correct answer.

According to the Capital Asset Pricing Model (CAPM),which of the Following