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Which of the following best describes the role of the Capital Asset Pricing Model (CAP

Q: Answer-Which of the following best describes the role of the Capital Asset Pricing Model (CAPM) in determin...

The Capital Asset Pricing Model CAPM estimates the required return on an asset by considering the systematic risk beta of the asset relative to the market . It uses the risk-free rate such as the return on government bonds and the market risk premium the return expected from the market above the risk-free rate. This model assumes investors are rational and markets are efficient, helping investors make decisions based on the expected return given the assets risk.

M in determining the required return on an asset in the capital market ?

A CAPM calculates the intrinsic value of a stock by considering its earnings and dividend projections.

B CAPM helps estimate the required return on an asset by accounting for its systematic risk relative to the market, using the risk-free rate and the market risk premium.

C CAPM evaluates the liquidity risk of a stock by incorporating the bid-ask spread into its expected return

D CAPM is used to determine the volatility of an asset based on historical price movements without factoring in broader market trends

E CAPM applies only to private companies, helping them determine their cost of equity when going public

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Which of the following best describes the role of the Capital Asset Pricing Model (CAP

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