alleryStart learning →CAPM rests on the idea that investors holding stocks with higher systematic risk should be:
ARewarded more
BRewarded less
CTaxed more heavily
DBarred from trading
Answer & Solution
Correct answer: A. Rewarded more
1. The model links risk borne to return earned.
2. The capital asset pricing model is a financial theory.
3. It is based on the idea that investors willing to hold higher systematic risk are rewarded.
4. They should be rewarded more for taking on this market risk.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 15 'Risk, Return, and Capital Market Theory'_
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