Answered: In the context of the Capital Asset…

In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is A. standard deviation of returns. B. beta. C. variance of returns. D. unique risk.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter2: Financial Reporting: Its Conceptual Framework

Section: Chapter Questions

Problem 10GI: Define (a) return on investment, (b) risk, (c) financial flexibility, (d) liquidity, and (e)...

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Question

In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is

A. standard deviation of returns.

B. beta.

C. variance of returns.

D. unique risk.

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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