Question

Section
FSM 1
Question No. 41
Which of the following is not an assumption of CAPM Model?
O Transaction costs are either absent or so low that these can be ignored
O Assets can be bought and sold only in specified lots.
O The investor is limited by his wealth and the price of the asset only
O Taxes do not affect the choice of buying assets​

Answer 1

The correct answer is option "c" and that is not an assumption of CAPM model.

The investor is limited by his wealth and price of asset only.

Answer 2

The correct answer is The investor is limited by his wealth and the price of the asset only.

• The Capital Asset Pricing Model (CAPM) is a mathematical model that depicts the relationship between systematic risk and expected return for assets, primarily stocks.

• The CAPM model assumes that the investor is not limited by his wealth and the price of the asset only.

• CAPM is commonly used in finance to price risky securities and forecast asset returns based on risk and cost of capital.