Asked by Andreas Frånlund on Jun 28, 2024
Verified
The Capital Asset Pricing Model (CAPM) assumes that a risk-free asset has no systematic risk.
CAPM
The Capital Asset Pricing Model, a formula used to determine the theoretical expected return of an investment given its risk relative to the market.
Risk-free Asset
An investment with zero risk of financial loss, typically considered to be government bonds.
Systematic Risk
Systematic risk refers to the risk inherent to the entire market or market segment, which cannot be mitigated through diversification.
- Acquire knowledge of the rudimentary principles and assumptions associated with the Capital Asset Pricing Model (CAPM).
Verified Answer
MA
Michael and Roni SteinmeyerJul 01, 2024
Final Answer :
True
Explanation :
CAPM assumes that a risk-free asset has no systematic risk, meaning its returns are not affected by market movements, which is why its beta (a measure of systematic risk) is zero.
Learning Objectives
- Acquire knowledge of the rudimentary principles and assumptions associated with the Capital Asset Pricing Model (CAPM).