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Based on the Capital Asset Pricing Model (CAPM), which one of the following statements is...

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Finance

Based on the Capital Asset Pricing Model (CAPM), which one of the following statements is TRUE regarding risky assets?

Question 1 options:

Expected return of a stock is determined by its firm specific risk.

The risk premium of a risky asset equals to the assets beta times the market risk premium.

The market risk premium is the difference between the return on the risky asset and the return on the market portfolio.

Risk premium is the difference between the return on a risky asset and the return on the market portfolio.

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