he best answer with respect to a stock's "alpha"? (In a CAPM world) Group of answer choices The expected return on an asset relative to the expected return on the market The expected return on an asset relative to the riskiness of the asset The expected return on an asset relative to the risk free rate The expected return on an asset relati
he best answer with respect to a stock's "alpha"? (In a CAPM world) Group of answer choices The expected return on an asset relative to the expected return on the market The expected return on an asset relative to the riskiness of the asset The expected return on an asset relative to the risk free rate The expected return on an asset relati
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 1P
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Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Select the best answer with respect to a stock's "alpha"? (In a CAPM world)
Group of answer choices
The expected return on an asset relative to the expected return on the market
The expected return on an asset relative to the riskiness of the asset
The expected return on an asset relative to the risk free rate
The expected return on an asset relative to what CAPM predicts for the asset's expected return
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