Explain the following terms in the Capital Asset Pricing Model (CAPM): 1. Risk-Free Rate 2. Beta 3. Equity Risk Premium 4. Market Rate of Return 5. Market Risk Premium
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Explain the following terms in the
1. Risk-Free Rate
2. Beta
3. Equity Risk Premium
4. Market
5. Market Risk Premium
Step by step
Solved in 2 steps
- Can someone give an example or scenario about the following: 1. Capital Asset Pricing Model2. Market Risk premium3. Risk free rate4. Security market line5. Systematic riskThis is a generalized framework for analyzing the relationship between risk and return: a. capital asset pricing model b. diversification theory c. capital market line d. arbitrage pricing theoryThe Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumption
- Capital asset pricing theory asserts that portfolio returns are best explained by:a. Economic factors.b. Specific risk.c. Systematic risk.d. Diversification.What is the Capital Asset Pricing Model (CAPM)? Derive the risk premium when beta is between 0 and 1. Interpret your result.Explain the relationship between JENSEN's alpha and the security marketline of the Capital asset pricing model (CAPM).
- The slope of the Security Market Line equals to ____, and the slope of Capital Allocation Line equals to____. Select one: A. Beta; Sharpe Ratio B. Market Risk Premium; Sharpe Ratio C. Risk free rate; Volatility D. Market Risk Premium; VolatilityAn efficient capital market is best defined as a market in which security prices reflect which one of the following? Multiple Choice A Current inflation B A risk premium C All available information D The historical arithmetic rate of return E The historical geometric rate of returnA. Realized return B. Ex ante alpha C. Ex post alpha D. Realized beta Question 7 (MCQ) One example of a build up model is: A. A macroeconomic model B. Capital Asset Pricing Model (CAPM) C. Bond yield plus risk premium D. Fama and French model
- Make a simple example of the following: a. Capital Gain (or Losses) b. Expected Return c. Real Return d. Risk-free Return e. Required Return f. Holding Period ReturnIn the capital asset pricing model, the general risk preferences of investors in the marketplace are reflected by ________. the level of the security market line the slope of the security market line the difference between the beta and the risk-free rate the risk-free rateAccording to the CAPM (capital asset pricing model), and the security market line is a straight line.What does the slope of this line (Rise / Run) represent?