What Is the Capital Asset Pricing Model

What in the world is beta? And how does it relate to the risk-free rate or the risk premium? We need to understand these Key terms to grasp the capital asset pricing model. Capital asset pricing model = risk-free rate + beta (Stock market return - risk-free rate). The risk-free rate is the return on an investment that is guaranteed to pay us back (e.g., U.S. Treasury bills).

Visit Us