Asked by
Jordan Scrivens
on Nov 03, 2024
Verified
Capital asset pricing theory asserts that portfolio returns are best explained by
A) reinvestment risk.
B) specific risk.
C) systematic risk.
D) diversification.
Capital Asset Pricing
A model that describes the relationship between the expected return of an investment and the risk, or beta, relative to the market.
Systematic Risk
The risk inherent to the entire market or market segment, which cannot be mitigated through diversification.
- Distinguish between systematic and unsystematic risks.
- Comprehend the correlation between expected return and beta as a crucial element of the Capital Asset Pricing Model (CAPM).
Verified Answer
MR
Learning Objectives
- Distinguish between systematic and unsystematic risks.
- Comprehend the correlation between expected return and beta as a crucial element of the Capital Asset Pricing Model (CAPM).