9. The Capital Asset Pricing Model (CAPM) measures a. the expected rate of retur

Question

9. The Capital Asset Pricing Model (CAPM) measures a. the expected rate of return of an asset. b. the realized rate of return of an asset. c. the risk-free rate of return. d. the systematic risk level of an asset. Answer: 0. Which of the following statements is true about common stock? a. Owners of common stock have the lowest-priority claim on the firm's assets in the event of bankruptcy b. Common-stock holders have unlimited liability toward the obligations of the corporation. c. Common stock is considered to have a fixed maturity d. Owners of common stock are guaranteed dividend payment by the firm. wer:

Explanation / Answer

9)

Expected return (CAPM) = Rf+×Rp

Rf is risk free return

is beta of the security

Rp is risk premium

This expected return is based on beta, risk free rate and risk premium.

Hence, correct option is (a).

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