The fact that tests have shown the CAPM intercept to be greater than the RFR is consistent with a
A) Zero beta model.
B) An unstable beta or a higher borrowing rate.
C) Zero beta model or a higher borrowing rate.
D) higher borrowing rate.
E) An unstable beta.

Question

Quizplus · Accepted Answer

The CAPM intercept being greater than the risk-free rate (RFR) suggests either the presence of a zero-beta model, where the intercept is not necessarily the RFR, or a higher borrowing rate, which would increase the intercept above the RFR.

The Fact That Tests Have Shown the CAPM Intercept to Be