The capital asset pricing model (CAPM) relates the risk-return tradeoffs of individual assets to market returns.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) is a financial model that describes the relationship between risk and expected return, and it is commonly used to estimate the expected return on an investment by considering the risk of that investment and comparing it to the market returns. Therefore, it indeed relates the risk-return tradeoffs of individual assets to market returns.

The Capital Asset Pricing Model (CAPM) Relates the Risk-Return Tradeoffs