The Capital Assets Pricing Model Latest Exam With answers

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The Capital Asset Pricing
Model latest exam question and
answer

Corporate Finance

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Chapter 09 - The Capital Asset Pricing Model
Chapter 09
The Capital Asset Pricing Model


Multiple Choice Questions

1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk is A.
unique risk.
B. beta.
C. standard deviation of returns.
D. variance of returns.
E. none of the above.

Once, a portfolio is diversified, the only risk remaining is systematic risk, which is measured
by beta.

Difficulty: Easy




3. In the context of the Capital Asset Pricing Model (CAPM) the relevant risk is A.
unique risk.
B. market risk
C. standard deviation of returns.
D. variance of returns.
E. none of the above.

Once, a portfolio is diversified, the only risk remaining is systematic risk, which is measured
by beta.

Difficulty: Easy




4. According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio's rate of
return is a function of A. market risk
B. unsystematic risk
C. unique risk.
D. reinvestment risk.
E. none of the above.


With a diversified portfolio, the only risk remaining is market, or systematic, risk. This is the
only risk that influences return according to the CAPM.