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Asset Pricing Model - CAPM |
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A
model describing the relationship between risk and expected return,
and serves as a model for the pricing of risky securities. CAPM says
that the expected return of a security or a portfolio equals the rate
on a risk-free security plus a risk premium.
If this expected return does not meet or beat required return then
the investment should not be undertaken.
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There
are books and research papers written entirely on CAPM and how to
determine the risk premium for various securities. |
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Dictionary
