The correct answer is D. all of the above.
The capital asset pricing model (CAPM) is a model that describes the relationship between risk and return for assets, and is often used to calculate the expected return of a security. The CAPM assumes that there are no taxes, no transaction costs, and fixed quantities of assets.
The assumption of no taxes means that investors do not pay taxes on their investment returns. This assumption is made because taxes can vary depending on the investor’s tax situation, and it is difficult to account for all of the possible tax scenarios.
The assumption of no transaction costs means that there are no fees or commissions associated with buying or selling assets. This assumption is made because transaction costs can vary depending on the asset and the broker, and it is difficult to account for all of the possible transaction costs.
The assumption of fixed quantities of assets means that the number of shares of each asset is fixed. This assumption is made because the number of shares of an asset can change over time, and it is difficult to account for all of the possible changes in the number of shares.
The CAPM is a useful tool for investors, but it is important to remember that it is based on a number of assumptions. If any of the assumptions are violated, the CAPM may not be accurate.