The assumptions of CAPM Individual assets are infinitely divisible meaning that an investor can by a fraction of a share if he or she so desires There is a riskfree rate at which an investor may either lend or borrow money. Taxes and transaction costs are irrelevant All investors have the same one-period horizonThe Assumptions of CAPM • Individual assets are infinitely divisible, meaning that an investor can by a fraction of a share if he or she so desires. • There is a riskfree rate at which an investor may either lend or borrow money. • Taxes and transaction costs are irrelevant. • All investors have the same one-period horizon