According to the capital asset pricing model, which of the following will increa

Question

According to the capital asset pricing model, which of the following will increase the expected rate of return on a security that has a beta that is less than that of the market? Assume the market rate of return is greater than the risk-free rate and both rates are positive.

I. decrease in the risk-free rate

II. increase in the risk-free rate

III. increase in the market risk premium

IV. decrease in the market rate of return

I and III only

II and III only

II and IV only

I and IV only

II, III and IV only

I and III only

II and III only

II and IV only

I and IV only

II, III and IV only

Explanation / Answer

Answer ) b.) II and III only.

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