Assumptions for CAPM question and answers 2023 updated

Assumptions for CAPM question and answers 2023 updated Assumption 1 - correct answer All investors are Markowitz-efficient and seek to invest on the efficient frontier. The exact location depends on their risk return utility function Assumption 2 - correct answer Investors can borrow and lend any amount of money at the RFR Assumption 3 - correct answer All investors have homogeneous expectations, meaning they estimate the same probability distribution for future rates of return. Assumption 4 - correct answer All investors have the same 1 period time horizon. The model will be developed for that specific time horizon. Assumption 5 - correct answer All investments are infinitely divisible. This allows for fractional shares and continuous investment alternative curves. Assumption 6 - correct answer No taxes or transaction costs. Assumption 7 - correct answer No inflation or change in interest rates. Any change in inflation is fully anticipated. Assumption 8 - correct answer Capital Markets are in equilibrium.