Recommendations & StrategiesQuestion 56 of 110
The Capital Asset Pricing Model (CAPM) expresses the expected return of a security as a function of which of the following?
a.Only the security's dividend yield
b.The company's book value alone
c.The risk-free rate plus beta times the market risk premium
d.The security's standard deviation only
Explanation
CAPM states that a security's expected return equals the risk-free rate plus its beta multiplied by the market risk premium (the market return minus the risk-free rate). It links expected return to systematic risk as measured by beta. Total risk measured by standard deviation is not the CAPM input.
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