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  3. The Capital Asset Pricing Model (CAPM)
  4. 205178

CAPM model, compare standard deviation with expected return

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Is the following statement True, False, or Ambiguous? Provide a short justification for your
answer (you are evaluated on the justification).

"In the CAPM model, since investors are compensated for holding risk, two securities with the same standard deviation should have the same expected return."

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Solution Preview

False. CAPM is applicable when we are picking securities for building portfolio. It considers Beta as ...

Solution Summary

Answers a conceptual question on CAPM.

$2.19

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