___________ a relationship between expected return and risk.
A)APT stipulates
B)CAPM stipulates
C)Both CAPM and APT stipulate
D)Neither CAPM nor APT stipulate

Question

Quizplus · Accepted Answer

Both CAPM (Capital Asset Pricing Model) and APT (Arbitrage Pricing Theory) stipulate a relationship between expected return and risk. CAPM suggests that the expected return on an asset is proportional to the asset's beta (systematic risk), while APT suggests that the expected return on an asset is determined by multiple factors or macroeconomic variables. Both models attempt to explain how investors should be compensated for risk when making investment decisions.

___________ a Relationship Between Expected Return and Risk