The Capital Asset Pricing Model (CAPM) formula states that the expected return of a security equals the risk-free rate plus a risk premium that is proportional to the security's sensitivity to non-diversifiable market risk, as measured by its beta. The risk premium is calculated as the difference between the expected market return and the risk-free rate, multiplied by the security's beta. CAPM is used to determine the cost of equity for securities and whole businesses.
The Capital Asset Pricing Model (CAPM) formula states that the expected return of a security equals the risk-free rate plus a risk premium that is proportional to the security's sensitivity to non-diversifiable market risk, as measured by its beta. The risk premium is calculated as the difference between the expected market return and the risk-free rate, multiplied by the security's beta. CAPM is used to determine the cost of equity for securities and whole businesses.
The Capital Asset Pricing Model (CAPM) formula states that the expected return of a security equals the risk-free rate plus a risk premium that is proportional to the security's sensitivity to non-diversifiable market risk, as measured by its beta. The risk premium is calculated as the difference between the expected market return and the risk-free rate, multiplied by the security's beta. CAPM is used to determine the cost of equity for securities and whole businesses.