3. The basics of the Capital Asset Pricing Model Aa Aa E Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply. D Asset quantities aren't given. X Investors have homogeneous expectations. X Assets won't be short sold. X Investors assume that their investment activities won't affect the price of a stock. Consider the equation for the Capital Asset Pricing Model (CAPM): Covri, I'm) i = PRF + (CM - PRF) X- In this equation, the term Cov(ri, rm) / o represents the stock's beta coefficient Suppose that the market's average excess return on stocks is 10.00% and that the risk-free rate is 1.00%. Complete the following table by computing expected returns to stocks for each beta coefficient using the Capital Asset Pricing Model (CAPM): bi Return to Stocks (%) L -0.50 0.30 1.00 3.00 31.00 Based on the CAPM and your calculations for the return to stocks, what does it mean when the coefficient bi > 1? O The stock is less volatile than the market. The stock is more volatile than the market. The stock's return correlates with the stock market as a whole