The expected return on a security depends on which of the following? I. risk-free rate of return
II) amount of the security's unique risk
III market rate of return
IV) standard deviation of returns
A) I and III only
B) II and IV only
C) II, III, and IV only
D) I, III, and IV only
E) I, II, III, and IV

Question

Quizplus · Accepted Answer

The expected return on a security is influenced by the risk-free rate of return and the market rate of return, as these are components of the Capital Asset Pricing Model (CAPM). Unique risk and standard deviation are not directly used in calculating expected return in CAPM.

The Expected Return on a Security Depends on Which of the Following