1) The capital asset pricing model (CAPM) relates the risk return trade-off of individual assets to market returns so that a security has a risk-free rate of return and a premium for risk.
•. Explain in detail the components of CAPM.
•. Be sure to include the formula and an explanation of beta.
2) Explain cost of capital in terms of the financing costs to the corporations. Include a detailed explanation of the following:
•. Cost of debt
•. Cost of preferred stock
•. Cost of common stock
•.Cost of retained earnings