Capital Asset Pricing Model Formula
編輯歷史
| 時間 | 作者 | 版本 |
|---|---|---|
| 2022-06-13 08:03 – 08:04 | r1 – r29 | |
顯示 diff- Untitled
+ Capital Asset Pricing Model Formula
- This pad text is synchronized as you type, so that everyone viewing this page sees the same text. This allows you to collaborate seamlessly on documents!
+ What is CAPM?
+ It reflects that the expected return on a security is equal to the risk-free return plus a risk premium, which is based on the beta of that security. Below is an illustration of the CAPM concept.
+
+ The Capital Asset Pricing Model Formula is a term that examines the relationship between the expected return and risk of investing in a security.
+
+ CAPM Formula and Calculation
+ CAPM is calculated according to the following formula:
+ Ra = Rrf + [Ba * (Rm –Rrf)]
+
+ Where:
+ Ra = Expected return on a security
+ Rrf = Risk-free rate
+ Ba = Beta of the security
+ Rm = Expected return of the market
+
+ Note: “Risk Premium” = (Rm – Rrf)
+ The Capital Asset Pricing Model Formula is used for calculating the expected returns of an asset. It is based on the idea of systematic risk (otherwise known as non-diversifiable risk) that investors need to be compensated for in the form of a risk premium. A risk premium is a rate of return greater than the risk-free rate. When investing, investors desire a higher risk premium when taking on more risky investments.
+
+ Why CAPM is Important
+ The CAPM formula is widely used in the finance industry. It is vital in calculating the weighted average cost of capital (WACC), as CAPM computes the cost of equity.
|
||
| 2022-06-13 08:03 | r0 | |
顯示 diff+ Untitled
+ This pad text is synchronized as you type, so that everyone viewing this page sees the same text. This allows you to collaborate seamlessly on documents!
|
||