-Explain in detail the components of CAPM.
-Please also include the formula and an explanation of beta.
The capital asset pricing model is a way for an investor to look at the risk and return of an investment by evaluating the risk of the investment against both risk-free US Treasury bills and the stock market as a whole using the following formula: rf + b ( rm - rf ). The three components of the CAPM is the risk free rate, the beta coefficient and the expected market return. The risk free rate is the minimum return an investor ...
The solution contains 307 words of text.
The Capital Asset Pricing Model - Beta
Research suggests that the mining sector had a beta of 1.7 while utility companies had a beta of 0.5. Can you explain why there is a difference given beta is determined by cyclicality of revenues, operating and financial leverage?View Full Posting Details