A. The required rate of return on equity capital in the capital asset pricing model is the risk-free rate (determined by U.S. government securities) plus the product of the market risk premium multiplied by the beta coefficient (beta measures the firm's risk). The market risk premium is the amount above the risk-free rate that will induce investment in the market. The beta coefficient of an individual stock is the correlation between the volatility (price variation) of the stock market and that of the price of the individual stock.

B. Because the beta coefficient measures the sensitivity of the investment's returns to market volatility.

C. Because the standard deviation is a measure of the variability of an investment's returns.

D. Because the coefficient of variation is the standard deviation of an investment's returns divided by the mean return.