Question: Please show the specific progress and formula. The Capital Asset Pricing Model (CAPM) is a model used to compute returns (expected returns) for different assets.
Please show the specific progress and formula.
The Capital Asset Pricing Model (CAPM) is a model used to compute returns (expected returns) for different assets. In the model, rf is the risk-free rate (the rate paid on a government bond or on a bank deposit); rm is the market rate of return (the rate of return on a large, diversified, collection of assets, where the un-systematic risk has been diversified away); beta coefficient BA for the asset, for which we would like to compute the rate of return. Part 1 Return on the market is 10% per year. Risk-free rate is 2% per year. Consider a stock that has expected return of ra = -6% per year. What is this stock's beta? Part 2. CAPM: Stock. A stock has expected returns of 1.9% per year. The standard deviation of returns on this stock is 60% (annual). The market return is 8.5% per year, and the risk-free rate is 3.0% per year. The standard deviation of returns on the market is 30% (annual). What is the correlation of returns on this stock with market returns
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