Even though many of the CAPM assumptions are violated in the real world which of the following provides a reason to use the model in investment decisions?
A) the efficient set must be the same for all investors
B) the amount of risk free lending or borrowing undertaken will be the same
C) every investor has the same expectations with regards to expected returns and risks for available securities
D) everyone faces the same risk free rate

Question

Quizplus · Accepted Answer

While the amount of risk free lending or borrowing can influence an investor's decision to hold a certain portfolio, it is not necessary for every investor to undertake the same amount of lending or borrowing for all investors to be willing to hold the same risky portfolio. A, C, and D are all conditions that must be met for investors to be willing to hold the same risky portfolio.

Even Though Many of the CAPM Assumptions Are Violated in the Real