Even though many of the CAPM assumptions are violated in the real world which of the following provides a reason to use the model in investment decisions?
A) The model helps to understand and to predict the investment process.
B) It is only the secondary conclusions of the CAPM that are violated in the real world.
C) Most investors are able to borrow as well as lend at the risk free rate of interest.
D) It is still reasonable to assume most investors will prefer portfolios with lower standard deviations.

Question

Quizplus · Accepted Answer

Even though the real-world does not fully conform to the CAPM assumptions, it can still provide insights and serve as a useful framework in investment decision-making. The model can be helpful in understanding the relationship between risk and return, and predicting the expected returns of different asset classes.

Even Though Many of the CAPM Assumptions Are Violated in the Real