In Applying the Capital Asset Pricing Model (CAPM) to Estimate

Multiple Choice

In applying the Capital Asset Pricing Model (CAPM) to estimate a firm's cost of equity capital, the beta coefficient (β) in the model represents

A) The expected dividend per share divided by the current market price per share of common stock.
B) The cost of retained earnings.
C) The yield-to-maturity on long-term bonds payable.
D) A measure of the sensitivity of the firm's stock return to fluctuations in the returns of the overall market.
E) The "market risk premium" for that firm's stock.