For the CAPM, the market portfolio
A) is frequently represented by the Standard and Poor's 500.
B) includes a well defined group of common and preferred stocks.
C) includes only dividend or interest paying investments.
D) should not include real estate investments.

Question

Quizplus · Accepted Answer

The market portfolio for the CAPM is frequently represented by a broad-based market index, such as the Standard and Poor's 500 (S&P 500). Other indices could also be used, as long as they are considered representative of the overall market. Therefore, choice A is the correct answer. The market portfolio does not include a specific group of stocks or only dividend or interest-paying investments, and it is not necessarily limited to exclude real estate investments.

For the CAPM, the Market Portfolio