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The CAPM equation is best stated as:
AE(R) = Rf + β · Rm
BE(R) = Rf + β · (Rm − Rf)
CE(R) = β · (Rm − Rf)
DE(R) = Rm + β · (Rf − Rm)
Answer & Solution
Correct answer: B. E(R) = Rf + β · (Rm − Rf)
1. Identify what the question asks: this concept maps to capmequation (§7).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (B).
_Source: ICAI BoS CA Final Paper 2, Ch 6 "Portfolio Management"_
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