1 / 3

Capital Asset Pricing Model

The CAPM model (Capital Asset Pricing Model) is one of the foundational models in finance designed to specify the appropriate required rate of return of a financial asset or investment. CAPM is mostly applied to financial assets (securities). Since the core of the CAPM model is the "beta" parameter, which is the most widely employed financial measure used by academic researchers and practitioners, we shall get a bit more insight into its function.

financesevaloan
Download Presentation

Capital Asset Pricing Model

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Capital Assist Pricing Model Calculator

  2. Capital Assist Pricing Model Calculator • The CAPM model capital asset pricing model calculator is one of the foundational models in finance designed to specify the appropriate required rate of return of a financial asset or investment. CAPM is mostly applied to financial assets (securities). Since the core of the CAPM model is the "beta" parameter, which is the most widely employed financial measure used by academic researchers and practitioners, we shall get a bit more insight into its function. • The what is capital asset pricing model uses a variation of discounted cash flows; only instead of giving yourself a "margin of safety" by being conservative in your earnings estimates, you use a varying discount rate that gets bigger to compensate for your investment's riskiness.

  3. There are diverse ways to measure risk; the original CAPM defined risk in terms of volatility, as measured by the investment's beta coefficient. The formula is: • Kc   =   Rf   +   beta x (Km - Rf) • where • Kc is the risk-adjusted discount rate (also known as the Cost of Capital); Rf is the rate of a "risk-free" investment, i.e., cash; Km is the return rate of a market benchmark, like the S&P 500. • The capital asset pricing model calculator is an online platform where the process is online and within seconds you can get your solution on the screen.

More Related