n NISM Certifications
XV NISM Series XV
Medium

Which of the following best describes the ‘Capital Asset Pricing Model’ (CAPM)?

Practice question from NISM XV Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Measures liquidity risk

  2. Determines expected return of an asset based on risk-free rate, beta, and market risk premium

    Correct answer

  3. C

    Measures current ratio

  4. D

    Evaluates project feasibility

Why this is the answer

CAPM calculates the expected return on an asset using the formula: Expected Return = Risk-Free Rate + Beta × (Market Return – Risk-Free Rate). It helps investors price risk and return.

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