In capital asset pricing model, characteristic line is classified as____________?
Correct answer: A. Regression line
- A. Regression line
- B. Probability line
- C. Scattered points
- D. Weighted line
Explanation
The CAPM characteristic line is a regression line showing the relationship between a security’s return and the market return, with its slope representing beta. It is not a probability line or a collection of scattered points.
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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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