Explanation

Let's analyze each statement:

Option A: CORRECT

• Beta measures systematic risk in CAPM
• Investors are only compensated for systematic risk (non-diversifiable risk)
• Beta identifies the appropriate level of risk for which investors should be compensated

Option B: INCORRECT

• Unsystematic risk IS diversifiable through portfolio diversification
• There is NO reward for taking on unsystematic risk because it can be eliminated

Option C: INCORRECT

• According to CAPM, assets with equivalent betas should earn the same expected return
• The security market line (SML) shows that expected return is linearly related to beta

Answer: A