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HOSTING A TOTAL OF 318 FORMULAS WITH CALCULATORS

Capital Asset Pricing Model

The capital asset pricing model provides a formula that calculates the expected return on a security based on its level of risk. The formula for the capital asset pricing model is the risk free rate plus beta times the difference of the return on the market and the risk free rate.

To understand the capital asset pricing model, there must be an understanding of the risk on an investment. Individual securities carry a risk of depreciation which is a loss of investment to the investor. Some securities have more risk than others and with additional risk, an investor expects to realize a higher return on their investment

r+b[m-r]

Here,m=return on the market,r=risk-free rate,b=beta.

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