According to the capital asset pricing model (CAPM), which of the following statements is true (only of them is):   (a) A share with more total risk should provide a higher return than one with less total risk. (b) A share with more idiosyncratic risk should provide a higher return than one with less idiosyncratic risk. (c) A share with more systematic risk should provide a higher return than one with less systematic risk. (d) Only a share with no risk (either systematic or idiosyncratic) should pay the risk free rate. (e) The expected market return is the appropriate discount rate of risky projects.

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.