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Investor Behavior

Which assumptions regarding investor behavior are required by the CAPM?
1. Investors try to maximize their wealth
2. Investors consider only risk when making investments
3. Investors are risk averse
4. Investors adopt a long-term perspective

Solution Preview

The CAPM formula = risk free rate + (beta x (required return - risk free rate)

Answer: 1 and 4

The ...

Solution Summary

This solution provides the correct answer with explanation to the CAPM multiple choice question listed.