In a simple CAPM world which of the following statements is (are) correct?
I. All investors will choose to hold the market portfolio, which includes all risky assets in the world.
II. Investors' complete portfolio will vary depending on their risk aversion.
III. The return per unit of risk will be identical for all individual assets.
IV. The market portfolio will be on the efficient frontier, and it will be the optimal risky portfolio.
A) I, II, and III only
B) II, III, and IV only
C) I, III, and IV only
D) I, II, III, and IV

Question

Quizplus · Accepted Answer

In the CAPM world, all investors will hold the market portfolio (I), their complete portfolio mix varies by risk aversion (II), the market portfolio is on the efficient frontier and is optimal (IV), and due to the CAPM assumptions, all assets are priced to have the same return per unit of risk (III).

In a Simple CAPM World Which of the Following Statements