THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
A professor of statistics is interested in studying the relationship between the number of hours graduate students spent studying for his comprehensive final exam and the exam score.The results of the regression analysis of hours studied on exam scores are presented below.
-Using financial analysis based on the capital asset pricing model,the required return on an investment is given by:
A)(Required return on investment)= (risk-free rate)+ [(beta for investment)× ((market return)- (risk-free rate))]
B)(Required return on investment)= (beta for investment)+ [(risk-free rate)× ((market return)- (beta for investment))]
C)(Required return on investment)= (beta for investment)+ [(beta for investment)× ((market return)- (risk-free rate))]
D)(Required return on investment)= (market return)+ [(beta for investment)× ((market return)- (risk-free rate))]

Question

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
A professor of statistics is interested in studying the relationship between the number of hours graduate students spent studying for his comprehensive final exam and the exam score.The results of the regression analysis of hours studied on exam scores are presented below. 
-Using financial analysis based on the capital asset pricing model,the required return on an investment is given by:
A)(Required return on investment)= (risk-free rate)+ [(beta for investment)× ((market return)- (risk-free rate))] 
B)(Required return on investment)= (beta for investment)+ [(risk-free rate)× ((market return)- (beta for investment))] 
C)(Required return on investment)= (beta for investment)+ [(beta for investment)× ((market return)- (risk-free rate))] 
D)(Required return on investment)= (market return)+ [(beta for investment)× ((market return)- (risk-free rate))]

Quizplus · Accepted Answer

This formula is the standard one for calculating the required return on an investment based on the CAPM. It takes into account the risk-free rate, beta for the investment, and the market return. Option B has the beta for the investment in the wrong place, while option C mistakenly includes the beta for the investment twice. Option D mistakenly includes the market return in two places.