According to the CAPM,investors are compensated for all but which of the following?
A) Expected inflation
B) Systematic risk
C) Time value of money
D) Residual risk

Question

Quizplus · Accepted Answer

According to the CAPM, investors are compensated for holding systematic risk or market risk, which is the risk that cannot be diversified away. They are not compensated for residual risk or unsystematic risk, which can be eliminated by diversification. However, investors are also compensated for expected inflation and the time value of money, which is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

According to the CAPM,investors Are Compensated for All but Which