Question: In the realm of finance, consider the concept of "Capital Asset Pricing Model" (CAPM), a widely-used method for calculating the expected return of an asset. Select the most appropriate statement regarding the CAPM and its components from the options below: A) The CAPM is primarily used for estimating the risk-free rate of return in financial markets, representing the minimum return an investor can expect without taking any risk. B) According to the CAPM, the systematic risk of an asset, also known as beta, measures its sensitivity to market movements in comparison to a diversified portfolio. C) The CAPM solely relies on historical data and past performance of assets to forecast their future returns, making it more accurate in predicting short-term investment outcomes. D) The market risk premium, a crucial component of the CAPM, is the difference between the expected return of the overall market and the risk-free rate. E) The CAPM assumes that all investors have the same level of risk aversion and therefore, will make investment decisions solely based on maximizing expected returns. F) The CAPM considers unsystematic risk, also known as specific risk, as the primary driver of an asset's return fluctuations in the market. G) The Security Market Line (SML), an essential graphical representation of the CAPM, plots the expected return of an asset against its beta to determine whether it is overvalued or undervalued. H) The CAPM fails to consider the influence of macroeconomic factors and global events on the returns of assets, rendering it less reliable during times of economic instability. I) Arbitrage Pricing Theory (APT), an alternative model to the CAPM, assumes that an asset's expected return can be explained by multiple factors, each carrying different levels of risk. J) The CAPM can be employed as a standalone tool for valuing assets, neglecting the necessity of using additional valuation methods like discounted cash flow (DCF) analysis. K) Empirical studies have shown that the CAPM's assumptions, such as frictionless markets and no taxes, often hold true in real-world scenarios, enhancing its accuracy and applicability. L) In practice, analysts often employ the CAPM to determine the appropriate required rate of return for various investment projects, enabling companies to make well-informed capital budgeting decisions. M) The beta coefficient, a fundamental element of the CAPM, is a reliable measure of an asset's total risk, incorporating both systematic and unsystematic risk components. N) The CAPM is suitable for valuing not only individual assets but also entire portfolios, facilitating the construction of diversified investment strategies to minimize risk and maximize returns. O) Despite its widespread use, the CAPM has faced criticism for its inability to fully capture the complexities of financial markets, leading to the development of more advanced asset pricing models. Select the combination of options that best describes the various aspects and implications of the Capital Asset Pricing Model (CAPM): A) A, C, D, E, I B) B, F, G, J, N C) D, G, H, K, M D) B, E, I, L, O (Note: Some options may not be selected, and more than one option can be correct. Choose the combination that includes all the appropriate statements about the CAPM.)