{"id":46500,"date":"2024-04-15T22:13:14","date_gmt":"2024-04-15T22:13:14","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=46500"},"modified":"2024-04-15T22:13:14","modified_gmt":"2024-04-15T22:13:14","slug":"according-to-capital-asset-pricing-model-assumptions-variances-expected-returns-and-covariance-of-all-assets-are","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/according-to-capital-asset-pricing-model-assumptions-variances-expected-returns-and-covariance-of-all-assets-are\/","title":{"rendered":"According to capital asset pricing model assumptions, variances, expected returns and covariance of all assets are"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a974befb88be\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    identical                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"true\">\r\n                    not identical                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    fixed                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    variable                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is B. not identical.<\/p>\n<p>The capital asset pricing model (CAPM) is a model that describes the relationship between risk and return for assets, and is widely used in finance to determine the expected return of a security. The CAPM assumes that all investors are rational and risk-averse, and that they will only invest in assets that have a positive expected return. The CAPM also assumes that all investors have access to the same information, and that there are no taxes or transaction costs.<\/p>\n<p>One of the assumptions of the CAPM is that the variances, expected returns and covariance of all assets are not identical. This means that different assets have different levels of risk, and that investors will demand different returns for different levels of risk. The <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> CAPM can be used to calculate the expected return of an asset, given its risk, and to compare the expected returns of different assets.<\/p>\n<p>Option A is incorrect because the CAPM assumes that the variances, expected returns and covariance of all assets are not identical.<\/p>\n<p>Option C is incorrect because the CAPM assumes that the variances, expected returns and covariance of all assets are not fixed.<\/p>\n<p>Option <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> D is incorrect because the CAPM assumes that the variances, expected returns and covariance of all assets are not variable.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>According to capital asset pricing model assumptions, variances, expected returns and covariance of all assets are<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/according-to-capital-asset-pricing-model-assumptions-variances-expected-returns-and-covariance-of-all-assets-are\/\" \/>\n<meta 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