Buy custom Capm The Effects Of Beta
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| Topic: |
Business
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| Number of pages / Number of words: |
10 / 2627 |
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In addition to the risk premium paid to the investor, he or she will also be rewarded the risk-free return rate (Value Based Management 2008). Mathematically (CAPM formula), the amount an investor will be paid for his portfolio, taking into account risk, is:
R=Rf + ? (Rm – Rf)
In the CAPM equation the expected return (R) is equal to the risk-free rate (Rf ) plus the product of beta (?) and market-risk premium (Rm – Rf) (Ross, Westerfield, & Jaffe 2007)...
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First, as mentioned previously, this model assumes that investors are risk avoiders who want to maximize their wealth within the period. Specifically, the CAPM is a one period model. It also generalizes all investors as having the same belief on returns, they receive all costless information simultaneously, and there is a frictionless, perfectly competitive market...
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10 YR Treasury risk-free rate of interest, krf.
Capm The Effects Of Beta
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