Final answer:
The statement is true. CAPM suggests that all assets have the same expected risk premium to systematic risk ratio in equilibrium. This relationship is reflected in the CAPM's security market line, where every asset's expected return is proportional to its systematic risk, or beta.
Step-by-step explanation:
The statement that CAPM predicts that, in equilibrium, every asset will have the same ratio of risk premium to systematic risk is True. Capital Asset Pricing Model (CAPM) indicates that the expected return on an asset is proportional to its systematic risk, which is also known as market risk or non-diversifiable risk. This proportional relationship is known as the security market line, and according to CAPM, all assets should lie on this line in equilibrium, which means that they all have the same expected return per unit of systematic risk, or beta.
In other words, CAPM suggests that the risk premium (the return over the risk-free rate) of any asset is equal to the product of the asset's beta and the market risk premium. Beta represents the sensitivity of an asset's returns to market movements, and the market risk premium is the additional return investors demand for taking on the risk of the market as a whole.
Furthermore, in a macroeconomic view, for financial markets to function properly, the quantity supplied of financial capital must be equal to the quantity demanded. This equilibrium ensures that the amount of savings and investments in the economy is balanced, allowing resources to be allocated efficiently.