Question

The CAPM is a theory of the relationship between risk and return that states that the expected risk premium on any security equals its beta times the market return.a. Trueb. False

Answer 1

Answer:

a. True

Explanation:

As we know that

Under CAPM, the cost of the capital  is  

= risk free rate of return + beta × (market rate of return - risk free rate of return)

=  risk free rate of return + beta × market risk premium

So it shows the relationship between the risk and return on which the expected risk premium equivalent to the beta and the same should be multiplied with the market return

Therefore the given statement is true