Capital Asset Pricing Model Calculator (CAPM)
編輯歷史
| 時間 | 作者 | 版本 |
|---|---|---|
| 2022-05-17 11:51 – 11:55 | r1 – r17 | |
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+ Capital Asset Pricing Model Calculator (CAPM)
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+ The valuation of the capital asset pricing model uses a variation of discounted cash flows. However, there are varied ways to measure the investment beta co efficient. The formula is:
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+ Kc = Rf + beta x ( Km - Rf )
+ where
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+ Kc is the risk-adjusted discount rate (also known as the Cost of Capital);
+ Rf is the rate of a "risk-free" investment, i.e. cash;
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+ Km is the return rate of a market benchmark, like the S&P 500.
+ Risk and the Capital Asset Pricing Model Formula
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+ In order to understand the capital asset pricing model calculator; one needs to have an understanding of risk on investment.
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+ Typically, Applicant securities carry a risk of depreciation which is equal to a loss of investment to the investor.
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+ Generally, some securities have more risk than others as compared to the additional risk.
+ The risk involved when evaluating a particular stock is accounted for in the capital asset pricing model formula with beta.
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+ Beta is the adequate term used to measure the capital asset pricing model formula to evaluate the risk involved with investing in a particular stock relative to the risk of the market.
+ The beta of the market would be 1. An individual security with a beta of 1.5 would be as proportionally riskier than the market and inversely, a beta of .5 would have less risk than the market.
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+ Alternative Capital Asset Pricing Model Formula
+ When regression analysis is applied to the capital asset pricing model based on prior returns, the formula will be shown as above. Alpha is considered to be the risk-free rate and epsilon is considered to be the error in the regression.
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| 2022-05-17 11:48 | r0 | |
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