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    Question

    Which of the following describes the relationship

    between systematic risk and return?
    A Arbitrage Pricing Theory Correct Answer Incorrect Answer
    B Capital Assets Pricing Model Correct Answer Incorrect Answer
    C Harry Marketing Model Correct Answer Incorrect Answer
    D Capital Market Line Correct Answer Incorrect Answer
    E Dividend Discount Model Correct Answer Incorrect Answer

    Solution

    The CAPM model helps to determine the required rate of return of equity investment or cost of equity by taking into account the systemic risk of the investment represented by the beta of that investment.

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