Question

Capital Asset pricing model approach describes _________________.

• A. The risk-required return trade-off for securities
• B. The behaviour of security prices
• C. Investor preferences
• D. The efficiency of security markets

Answer 1

The correct option is A The risk-required return trade-off for securities

The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and cost of capital.