Final answer:
The statement is false; CAPM asserts that the expected return on an asset is proportional to its systematic risk (beta), not that all assets will have the same return-to-risk ratio.
Step-by-step explanation:
The statement that CAPM (Capital Asset Pricing Model) predicts that, in equilibrium, every asset will have the same ratio of return to systematic risk is false. CAPM actually states that the expected return on an asset is related to its systematic risk, as measured by beta (β).
This relationship is depicted by the security market line (SML), which is a positively sloped straight line displaying the expected return of an asset as a function of its beta with the market portfolio. The slope of the SML is the market risk premium, and this model suggests that assets with higher systematic risk (higher beta) should have higher expected returns to compensate for that risk.
Each asset is indeed expected to have a return commensurate with its systematic risk, but the ratios of return to systematic risk will vary because each asset can have a different beta.