The CAPM:
A) uses the risk free rate of return and the efficient market portfolio to estimate risk.
B) considers the sensitivity of a stock to different risk factors to calculate risk.
C) uses the expected return on a given security to determine its overall risk.
D) measures the amount of unsystemic risk to determine the expected return of a stock
E) All of these answers are correct

Question

Quizplus · Accepted Answer

The CAPM uses the risk-free rate of return and the efficient market portfolio to estimate risk. It calculates the expected return of a security based on its systematic risk.