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Financial Forensics · End Term · 13 Apr 2025 · January 2025 term · Set 1-2

Question 3: Which of the following statement(s) is correct about the …

Question 3

+1 markOne correct option

Which of the following statement(s) is correct about the Capital Asset Pricing Model:
I. If the beta of a stock is greater than 1, the expected return on the stock is higher than the market return, assuming all other factors remain constant. II. If the covariance between the return on a stock and the return on the market is zero, the stock's beta will also be zero. III. As per CAPM, the risk-free rate has no impact on the expected return of a stock. IV. A stock with a negative beta can have an expected return lower than the risk-free rate.

  1. A

    Option I, II and IV

  2. B

    Option II and III

  3. C

    Option II, III and IV

  4. D

    Option I and IV

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Correct answer

  • A

    Option I, II and IV

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Question 3 of 32 in the IIT Madras BS Financial Forensics (Financial Forensics) End Term paper sat on 13 Apr 2025, in the January 2025 term (IIT M IMPROVEMENT FN EXAM QIM2 13 Apr). It carries 1 mark.

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