Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return
A)when it has a greater systematic risk.
B)when it has a greater risk in isolation.
C)when it has a lower systematic risk.
D)when it has a lower systematic risk and a lower risk in isolation.

Question

Quizplus · Accepted Answer

Both CAPM and APT suggest that an asset's expected return should increase with its systematic risk or beta. Therefore, choice A is the correct answer. Choices B, C, and D are incorrect because they suggest pricing an asset based on its risk in isolation or based on a lower level of systematic risk, which is not consistent with the principles of CAPM and APT.

Both the CAPM and APT Suggest That an Asset Should