Answer: E. Capital asset pricing model
Explanation:
The Capital Asset Pricing model can be used to calculate the expected return of a security given some variables including its systematic risk which is measured by its beta.
The formula is;
Expected Return = Risk free rate + beta(market premium)
The model therefore shows that when the systematic risk is high, the expected return will also be high as well as helping to show the magnitude of the effect of a change in the market premium.
