According to the Capital Asset Pricing Model (CAPM), which one of the following statements is NOT true?
A)The expected rate of return of a security decreases proportionally with a decrease in the risk-free rate.
B)The expected rate of return of a security increases as its beta increases.
C)A fairly priced security has an alpha of zero.
D)In equilibrium, all securities lie on the security market line.

Question

Quizplus · Accepted Answer

According to CAPM, the expected rate of return of a security is positively related to the risk-free rate. Therefore, if the risk-free rate decreases, the expected rate of return of a security should also decrease.

According to the Capital Asset Pricing Model (CAPM), Which One