CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which of the following statements is incorrect concerning the CAPM?
A. It is intended to allow investors to calculate the realized rate of return on a security.
B. A diagram of the CAPM has beta on the horizontal axis.
C. The SML is the graphic depiction of the CAPM.
Explanation: The CAPM is intended to allow investors to calculate the required or appropriate expected rate of return on a security, not a realized rate of return. Realized returns are calculated, by definition, after the fact, while the CAPM is used before the fact.

User Contributed Comments 4

User Comment
EmmaBeale Ummm - B is incorrect - the CAPM has Std Dev on the horz axis - help?
littlecow EmmaBeale: it has beta on the x-axis. B is a correct statement.
joppy11 I agree with the answer. B is a correct statement.
Albireo EmmaBeale: CAPM has beta on the horizontal axis. Standard deviation is on the x-axis of the capital market line.
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