Your broker advised you to add some shares of a particular company to your portfolio. The broker indicated that you could expect a 10% return on your investment in 5 years and you decide to analyze the proposed expected return utilizing the Capital Asset Pricing Model (CAPM). You researched and found that the rate of the 5-year treasury is .30%, and the market risk premium is 5.6% and the company's beta is 1.55.

Write a short essay explaining the Capital Asset Pricing Model (CAPM).

Answer rating: 100% (QA)

The Capital Asset Pricing Model CAPM is a financial model used to determine the expected return on an investment by taking into account the systematic ... View the full answer