In the capital asset pricing model (capm), a measure of systematic risk is captured by a model that relates the required rate of return for a security to its risk as measured by beta.
What is meant capital asset pricing model (capm) ?
The Capital Asset Pricing Model (CAPM) explains the connection between systemic risk, or the general dangers of investing, and projected return for assets, notably equities.
To gauge this systematic risk, the CAPM was developed. For pricing risky securities and calculating projected returns for assets given the risk of those assets and the cost of capital, it is widely employed throughout the finance industry.
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