Which statement is correct?
A) the superior performance of value stocks is exactly what the CAPM would predict.
B) the CAPM predicts that investors are concerned only with the risk that cannot be diversified away.
C) few financial managers in practice use the CAPM to estimate the cost of capital.
D) the CAPM is a model of actual returns whereas the cost of capital is concerned with expected returns.

Question

Quizplus · Accepted Answer

The CAPM (Capital Asset Pricing Model) predicts that investors are concerned only with systematic risk, which is the risk that cannot be diversified away.

Which Statement Is Correct