The __________________ tells us that the expected return on a risky asset depends only on that asset's systematic risk.
A) Efficient Markets Hypothesis (EMH).
B) Systematic risk principle.
C) Open Markets Theorem.
D) Law of One Price.
E) Principle of diversification.

Question

Quizplus · Accepted Answer

The systematic risk principle is the concept that the expected return on a risky asset depends only on that asset's non-diversifiable risk, also known as its systematic risk. This principle underlies the Capital Asset Pricing Model (CAPM), which describes the relationship between systematic risk and expected return for assets, particularly stocks.

The __________________ Tells Us That the Expected Return on a Risky