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What is Understanding CAPM: Risk and Return Analysis about?
1. CAPM was developed in the 1960s and is based on the idea that rational investors require a risk premium for investing in risky assets rather than risk-free assets. 2. CAPM provides a framework for relating the risk and expected return of different investment opportunities by using the security market line. 3. According to CAPM, the expected return of an investment is determined by its systematic risk rather than its total risk, since systematic risk cannot be reduced by diversification.
- Author
- Ivraj Harlalka
- Language
- EN