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Romashka [77]
3 years ago
12

According to the capital asset pricing model (CAPM), a capital budgeting project that has a beta equal to zero should be evaluat

ed using a required rate of return equal to the risk-free rate. a. True b. False
Business
1 answer:
lara [203]3 years ago
6 0

Answer:

a. True

Explanation:

from the CAPM formula we can derive the statemeent as true.

Ke= r_f + \beta (r_m-r_f)

risk free = 0.05

market rate = 0.12

premium market = (market rate - risk free) 0.07

beta(non diversifiable risk) = 0

Ke= 0.05 + 0 (0.07)

Ke 0.05000

As the beta multiplies the difference between the market rate and risk-free rate a beta of zero will nulify the second part of the equation leaving only the risk-free rate. This means the portfolio is not expose to volatility

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<h3>What is the absolute advantage?</h3>

The ability of a party to produce a good or service more efficiently than its rivals is the foundation of the principle of absolute advantage. This idea or principle was first introduced in 1776 while covering international trade and using labor as the sole input.

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Answer:

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