# Capital Asset Pricing Model (CAPM): Definition, Formula, Advantages & Example

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

### Which of the following is true of the beta coefficient?

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### 2. Grab a calculator and let's use the CAPM. If the risk-free rate (as reflected by Company X returns) is 0.10, the average market return (as indicated by the 1-year return on Company Z) is 20.63, and Pear Products has a beta coefficient of 0.74, the appropriate required return for Pear Products (rounded to two decimal places) is:

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## About This Quiz & Worksheet

Show what you know about the capital asset pricing model (CAPM) by passing this multiple-choice quiz. The questions will cover topics such as the assumptions, use and formula of the model.

## Quiz & Worksheet Goals

Test yourself on the following with these study tools:

• The beta coefficient and what it indicates about risk
• Using the CAPM formula
• The nine assumptions of the CAPM
• Benefits of the CAPM

## Skills Practiced

Taking the quiz may help you develop the following skills:

• Defining key concepts - ensure that you can accurately define main phrases, such as beta coefficient
• Reading comprehension - ensure that you draw the most important information from the related lesson on the capital asset pricing model
• Problem solving - use the CAPM formula to solve practice problems
• Knowledge application - use your knowledge to answer questions about the CAPM's assumptions

## Additional Learning

To learn more about the CAPM, review the corresponding lesson called Capital Asset Pricing Model (CAPM): Definition, Formula, Advantages & Examples. This lesson covers the following objectives:

• Understand the practical and theoretical use of the CAPM
• Examine examples of the CAPM formula in use
• Know what a risk-free rate is
• Review the advantages of the CAPM
Final Exam
Chapter Exam

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