--%>
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 : Explain the basic goal of a business

    Normal 0 false false

    		•
  • Q : What is Workload Budget Adjustment

    Workload Budget Adjustment: Any adjustment to the presently authorized budget obligatory to maintain the level of service needed to fund a Workload Budget, as stated in the Government Code Section 13308.05. A workload budget adjustment is as well term

    		•
  • Q : What is Make-Buy Analysis Make-Buy

    Make-Buy Analysis: Business decision which compares the costs and advantages of manufacturing a product or product component alongside purchasing it. When the purchase price is high than what it would cost the manufacturer to prepare it, or when the m

    		•
  • Q : Rate of inflation Normal 0 false false

    Normal 0 false false

    		•
  • Q : State Schedule 11 Schedule 11 : It is

    Schedule 11: It is the outdated word for “Supplementary Schedule of Operating Expenses and Equipment.”

    		•
  • Q : Capital investment appraisal methods

    The capital investment appraisal methods like NPV, IRR, ARR, PV and Time value of money have become irrelevant post Celtic Tiger. Due to the depth of the recession companies do not have budgets to invest. Explain? At first use this

    		•
  • Q : Define Budget Budget : It is a plan of

    Budget: It is a plan of operation stated in terms of financial or other resource necessities for a particular period of time.

    		•
  • Q : Explain Budget Cycle Budget Cycle : The

    Budget Cycle: The time period needed to made a state financial plan and enacts that part of it applying to the budget year. The Significant events in the cycle comprise: • The preparation of G

    		•
  • Q : Why is replacement value of assets

    Why is the replacement value of assets method not used generally to value complete businesses?The replacement value of assets method is not frequently applied to complete business valuations since it is frequently very hard to locate similar ass

    		•
  • Q : Explain the investment opportunity

    Explain the investment opportunity schedule (IOS)? How does it help financial managers take business decisions? The investment opportunity schedule illustrates graphically proposed capital budgeting projects depicting the IRR and dollar amount

    		•