Since investors are rational and risk averse, they will require additional

for taking on additional risk.

Agency costs

Shares

Time value

Returns

Question $22$

If the beta of a stock is equal to one, then according to the CAPM

the stock's required retum is equal to the risk$-$free rate of return.

the stock's required retum is equal to the required retum on the market portfolio.

the stock's required return is greater than the required return on the market portfolio.

the stock's required return is less than the required return on the market portfolio.