One of the assumptions of capital market theory is that investors can borrow or lend at the risk-free rate.

Question

Quizplus · Accepted Answer

This assumption is central to capital market theory and states that investors can borrow or lend money at a risk-free rate, which is typically represented by the rate of return on government bonds. It allows for the creation of the Capital Asset Pricing Model (CAPM), which is widely used in finance to calculate expected returns on risky investments.

One of the Assumptions of Capital Market Theory Is That