The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk.

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The Capital Asset Pricing Model actually states that the expected return on an asset depends on its level of systematic risk, also known as beta. Unsystematic risk, such as company-specific events or fluctuations in the market, is considered diversifiable and does not affect the expected return according to the CAPM.

The Capital Asset Pricing Model States That the Expected Return