Type of relationship exists between an expected return and risk of portfolio is classified as___________?
Correct answer: B. Linear
- A. Non-linear
- B. Linear
- C. Fixed and aggregate
- D. Non-fixed and non-aggregate
Explanation
In the CAPM framework, expected return has a linear relationship with systematic risk, measured by beta. A higher beta therefore requires a proportionately higher expected return under the model.
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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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