According to the Capital Asset Pricing Model (CAPM), the expected rate of return on any security is equal To
A) r f + [E(r M)].
B) r f + [E(r M) - r f ].
C) [E(rM) - r f ].
D) E(r M) + r f .

Question

Quizplus · Accepted Answer

The expected rate of return on any security is equal to the risk-free rate plus the systematic risk of the security(beta) times the market risk premium, E(rM - rf ).

According to the Capital Asset Pricing Model (CAPM), the Expected