Question: Within the CAPM equation, a higher BETA can be interpreted as... Note CAPM: rs = rf + Beta(rm - rf) A. high Beta stock: one

Within the CAPM equation, a higher BETA can be interpreted as...

Note CAPM: rs = rf + Beta(rm - rf)

A.

high Beta stock: one would expect a return on the stock investment (rs) to exceed that of the S&P 500; however the riskiness of the stock would not exceed that of the market portfolio

B.

a beta that exceeds "1.3" can be viewed as stock that is riskier than an investment in a diversified portfolio such as the S&P 500

C.

high beta stock: the stock is riskier than the S&P 500, but one would not expect a higher return for such a stock

D.

None of the above

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!