--%>
Assignment Help - homework help

Risk from perspective of the Capital Asset Pricing Model

Discuss risk through the perspective of the Capital Asset Pricing Model (CAPM).
The Capital Asset Pricing Model, or CAPM, can be utilized to compute the appropriate required rate of return for an investment project specified its degree of risk as measured by beta (β). A project's beta reveals its degree of risk relative to the total stock market. In the CAPM, while the beta term is multiplied by the market risk premium term, the result is the additional return onto the risk-free rate that investors demand from that individual project. High-risk (high-beta) projects have high required rates of return, and low-risk (low-beta) projects have low required rates of return.

   Related Questions in Finance Basics

  • Q : Define Reversion Reversion : The return

    Reversion: The return of the unused part of an appropriation to the fund from which the appropriation was made, usually two years (that is, four years for federal funds) after the last day of an appropriation’s accessibility period. The Budget A

    		•
  • Q : Legal factors to restrict a corporation

    Are there any legal factors which could restrict a corporation in its attempt to pay cash dividends to common stockholders? Describe. A firm may be legally limited as to the dividends it can pay through existing bond indentures or loan agreemen

    		•
  • Q : Describe the risk-return relationship

    Describe the risk-return relationship.The relationship among risk and required rate of return is term as the risk–return relationship.  This is a positive relationship since the more risk assumed, the higher the required rate of retur

    		•
  • Q : Types of legal barriers to market entry

    Types of legal barriers to market entry exist: Kinds of legal barriers which make that difficult for the newer drug in the generic form towards entering market have been lack of the rigorous assessment about the patentability needs; thirty mouth stay

    		•
  • Q : Frauds in banks Frauds in banks : In

    Frauds in banks: In today’s world all the financial institutions face a major problem of security in banking operations. Today it is a challenge in front of ever bank to secure its functioning and avoid the fraudulent practices in their banks. I

    		•
  • Q : Finance associated to the fields of

    How is finance associated to the fields of economics and accounting?

    		•
  • Q : Define Schedule Schedule : The

    Schedule: The explanation of an appropriation in the Budget Bill or Act, exhibiting its distribution to each of the programs, categories, or therefore projects. OR The supplemen

    		•
  • Q : Derive the long-run aggregate supply

    Normal 0 false false

  • Q : What is State Operations State

    State Operations (SO): It is a character of expenditure symbolizing expenditures for the support of state government, exclusive of capital investments and expenses for the local assistance actions.

    		•
  • Q : What is Amendment Amendment : A

    Amendment: A proposed or customary change to a bill in the Legislature, the California Constitution, acts passed by the Legislature, or ballot initiative.

    		•