Use the following three statements to answer this question:
A) I, II and III are correct.
B) I and II are incorrect, III is correct.
C) I, II are correct, III is incorrect.
D) I, III are incorrect, II is correct.
I.The CAPM points out that rational investors should be compensated for unique risk.
II.The CAPM implies that non-systematic risk is the appropriate measure of risk to determine the risk premium required by investors for holding a risky security.
III.The expected return from non-systematic risk is zero.

Question

Quizplus · Accepted Answer

The CAPM suggests that investors should be compensated for systematic risk, not unique or non-systematic risk. Non-systematic risk can be diversified away, and thus the expected return from it is zero.

Use the Following Three Statements to Answer This Question