Question

When applying the CAPM, which of the following factors can be determined/estimated with the most precision? Option 1: Risk-free rate Option 2: Market risk premium Option 3: Beta coefficient Option 4: Expected return on the investment

Answer 1

Pick beta 3 coefficient The beta coefficient of "the market," which is the same as the beta of an average stock.

We know the beta coefficient of a highly diverse market is always 1.0. It is around this average figure with which we assess the relative systematic risk of the actual stocks.