A major difference between the application of the ICAPM compared with the domestic CAPM is:

A) estimation of beta
B) no uniform risk-free rate
C) identification of market portfolio
D all of the above

Question

A major difference between the application of the ICAPM compared with the domestic CAPM is:

A) estimation of beta
B) no uniform risk-free rate
C) identification of market portfolio
D all of the above

Quizplus · Accepted Answer

A number of complications arise when attempting to model in an international context.First,no uniform risk-free rate exists for all markets.Second,the existence of exchange rates results in an additional risk for investors,the effect of which needs to be included in the model.Exchange rate risk means that investors in different countries will perceive the risk and return characteristics of foreign investments differently.

A Major Difference Between the Application of the ICAPM Compared