What is CAPM?

Sharad Jaiswal
Sharad Jaiswal

Posted On: Mar 18, 2020

 

CAPM (Capital Asset Pricing Model) is used to describe the relationship between the risk of investing in security and the expected return from investing in that security. The CAPM gives the investors an idea about the required return for investment on a financial asset. This model uses a formula to calculate the expected returns of an asset. CAPM Formula Expected Return = Risk-Free Rate + (Beta x Market Risk Premium)

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