The CAPM Model makes all the assumptions below EXCEPT:
A) Assuming no transactional costs.
B) Assuming no personal income taxes.
C) Assuming all investors have different expectations about expected returns, and standard deviations for all traded securities.
D) Assuming all investors can borrow/lend at the risk-free rate.

Question

Quizplus · Accepted Answer

The CAPM Model assumes that all investors have the same expectations about expected returns and standard deviations for all traded securities, not different expectations as in option C. The other options, A, B, and D, are correct assumptions made by the model.

The CAPM Model Makes All the Assumptions Below EXCEPT