According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given___________?
Correct answer: B. Risk free rate of interest
- A. Identical and fixed returns
- B. Risk free rate of interest
- C. Fixed rate of interest
- D. Risk free expected return
Explanation
The CAPM assumes investors can borrow or lend unlimited amounts at the risk-free rate. This permits investors to combine the risk-free asset with the market portfolio in any desired proportion.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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