Question

What does the formula R = Rf + B (Rm - Rf) represent in the CAPM model?

a.

Portfolio Expected Return

b.

Market Rate of Return

c.

Risk-Free Rate

d.

Relationship between risk and expected return

Answer: (d).Relationship between risk and expected return Explanation:The formula R = Rf + B (Rm - Rf) in the CAPM model represents the relationship between risk and expected return, where R is the expected return, Rf is the risk-free rate, B is the beta of a portfolio, and Rm is the market rate.

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Q. What does the formula R = Rf + B (Rm - Rf) represent in the CAPM model?

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