When working with the CAPM, which of the following factors can be determined with the most precision?
A) the beta coefficient, bi, of a relatively safe stock.
B) the most appropriate risk-free rate, rrf.
C) the expected rate of return on the market, rm.
D) the beta coefficient of "the market," which is the same as the beta of an average stock.
E) the market risk premium (rpm).

Question

Quizplus · Accepted Answer

By definition, both the market and an average stock have betas of 1.0. Since we know this to be the case, we can obviously determine beta for the market or an average stock with precision.

When Working with the CAPM, Which of the Following Factors