Explore BrainMass
Share

Explore BrainMass

    The Capital Asset Pricing Model & CAPM

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    In one page explain what you think is the main 'message' of the Capital Asset Pricing Model to corporations and what is the main message of the CAPM to investors?

    © BrainMass Inc. brainmass.com October 10, 2019, 7:36 am ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/capital-asset-pricing-model-capm-588096

    Solution Preview

    The Capital asset pricing model has been used very widely and has three important conclusions:
    1. All assets must have at least a rate of return of a risk free bond. This is because no one would hold the risky asset if there is no incentive for anyone to hold the risky asset.
    2. There is no expected return of taking on unsystematic risk as that risk can be easily diversified. ...

    Solution Summary

    The solution concisely explains what CAPM means to a corporation and what it means to an investor. It talks about systematic and unsystematic risks and the kind of risk CAPM deals with. It answers the question being asked and provides a good explanation of the basic CAPM concepts. 265 words.

    $2.19