The only component of the CAPM equation that relates specifically to a company is: A)b_X. B)k_M. C)k_RF. D)(k_M - k_RF).

Question

Quizplus · Accepted Answer

The only component of the CAPM equation that relates specifically to a company is its beta (bX). Beta measures the systematic risk of a stock, which is the risk that cannot be diversified away. It is a measure of how much a stock's return moves in relation to the return of the market as a whole.

The Only Component of the CAPM Equation That Relates Specifically