According to the Capital Asset Pricing Model (CAPM),fairly priced securities
A)have positive betas.
B)have zero alphas.
C)have negative betas.
D)have positive alphas.
E)none of the above.

Question

Quizplus · Accepted Answer

According to the CAPM, the only factor that should affect the expected return of a security is its beta, which measures its sensitivity to market movements. Therefore, a security with a zero alpha (the additional return earned beyond what is predicted by its beta) is considered to be fairly priced, as its returns are solely determined by the overall market. A positive alpha indicates that the security is undervalued, while a negative alpha indicates that the security is overvalued. A security's beta can be positive, zero, or negative, but it is not the factor that determines fair pricing according to the CAPM.

According to the Capital Asset Pricing Model (CAPM),fairly Priced Securities