Capital Asset Pricing Model (CAPM)

Home » CMA Glossary Term » Corporate Finance » Capital Asset Pricing Model (CAPM)

The Capital Asset Pricing Model (CAPM) is a financial model used to determine the expected return on an investment by assessing its risk relative to the market. CAPM explained involves calculating the cost of equity, factoring in the risk-free rate, the investment’s beta, and the market risk premium. This model aids in making informed investment decisions by quantifying risk and potential returns.

CMA Exam Academy 16-Week Accelerator Program