The Capital Asset Pricing Model (CAPM) is an accepted method of determining a risk-adjusted rate of return on equity and requires some basic inputs in order to perform the calculation.

Required:

a)Undertake some basic research to find out when the CAPM was first developed and by whom. Outline your findings including details of the journal/textbook most closely associated with the CAPM.

b)The CAPM requires the determination of a risk-free rate of interest (rf), with government securities most commonly used as a proxy for the risk-free rate of interest. Outline whether it should be short/medium or long-term government securities that would best be used as the relevant proxy for rf.

c)There are often considerable differences in the reported betas of individual company shares included on a securities/stock exchange. Undertake some basic research to provide an example of where information on company betas can be accessed. Select any 3 securities/stock exchange-listed companies and discuss the reasons why they have differing reported betas.

That is, is it likely that companies operating across a number of industries will have different betas simply because of these different industries?