Asked by Cierra Clark on Jul 13, 2024
Verified
Consider the capital asset pricing model. The market degree of risk aversion, A, is 3. The risk premium is 2.25%. If the risk-free rate of return is 4%, the expected return on the market portfolio is ________.
A) 6.75%
B) 9%
C) 10.75%
D) 12%
Risk Premium
The extra return over the risk-free rate that investors require to compensate them for the risk of holding a risky asset.
Risk Aversion
A person's or entity's reluctance to take risks, preferring lower returns with known risks over higher returns with unknown risks.
- Master the fundamental principles and implications of the Capital Asset Pricing Model (CAPM).
Verified Answer
AP
Learning Objectives
- Master the fundamental principles and implications of the Capital Asset Pricing Model (CAPM).