When using the empirical approach,rather than a risk-based model,to compute an expected rate of return on a security,the beta values are replaced with:
A)the ratio of the market rate of return to the risk-free rate.
B)a singular value equal to the market-to-book value of the firm.
C)the firm's various attributes.
D)the ratio of the firm's historical average return to the risk-free rate.
E)the average standard deviation of the security's historical returns.

Question

Quizplus · Accepted Answer

The empirical approach to computing an expected rate of return on a security often involves using the firm's various attributes, such as financial ratios, market conditions, and other relevant factors, instead of relying on beta values which are used in risk-based models like the Capital Asset Pricing Model (CAPM).

When Using the Empirical Approach,rather Than a Risk-Based Model,to Compute