If you were to consider the CAPM as a one-factor model,then the factor would be the:
A)rate of inflation.
B)market risk premium.
C)GNP.
D)risk-free rate.
E)individual beta of each security or portfolio.

Question

Quizplus · Accepted Answer

The CAPM is a one-factor model and the factor is the market risk premium, which is the additional return that investors require for bearing the risk of investing in the market portfolio rather than in the risk-free asset. The market risk premium is calculated as the difference between the expected return on the market portfolio and the risk-free rate. Therefore, choice B is the correct answer.

If You Were to Consider the CAPM as a One-Factor