According to the CAPM, the correlation coefficient between a perfectly diversified portfolio and the market portfolio of all risky assets should be: -1.00 +1.00 00 Between 0 and -1.00 Between 0 and +1.00

According to the CAPM, the correlation coefficient between a perfectly diversified portfolio and the market portfolio of all risky assets should be: -1.00 +1.00 00 Between 0 and -1.00 Between 0 and +1.00

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 1PROB

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Question

16 - According to the CAPM, the correlation coefficient between a perfectly diversified portfolio and the market portfolio of all risky assets should be:

-1.00
+1.00
00
Between 0 and -1.00
Between 0 and +1.00

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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