The _____ tells us that the expected return on a risky asset depends only on that asset's nondiversifiable risk.
A) Efficient Markets Hypothesis (EMH)
B) systematic risk principle
C) Open Markets Theorem
D) Law of One Price
E) principle of diversification

Question

Quizplus · Accepted Answer

The systematic risk principle, also known as the Capital Asset Pricing Model (CAPM), tells us that the expected return on a risky asset depends only on that asset's nondiversifiable or systematic risk. This principle is fundamental to modern finance theory and is widely used in investment management. The other options are not directly related to this principle.

The _____ Tells Us That the Expected Return on a Risky