# Essay The Capital Asset Pricing Model ( Capm )

# Essay The Capital Asset Pricing Model ( Capm )

**Length:** 734 words (2.1 double-spaced pages)

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The security market line (SML) is a line that charts the efficient, or market, risk versus return of the entire market at a specific time and demonstrates all risky marketable securities. The SML basically diagrams the outcomes from the capital asset pricing model (CAPM) recipe. The x-hub speaks to the risk (beta), and the y-hub speaks to the normal return. The market risk premium is resolved from the incline of the SML.

The capital asset pricing model (CAPM) is a model that depicts the relationship amongst risk and expected return and that is utilized as a part of the pricing of risky securities.

The general thought behind CAPM is that investors should be remunerated in two ways: time estimation of cash and risk. The time estimation of cash is spoken to by the without risk (rf) rate in the equation and repays the investors for putting cash in any speculation over a timeframe.

Yes I agree, total risk is the relevant measure of risk....

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Check your paper »## Essay on Capital Asset Pricing Model ( Capm )

- Security market line (SML) is a line on a chart representing the capital asset pricing model (CAPM). The security market line plots risk versus expected return of the market. The security market line is a useful tool in determining the relationship between risk and return for individual securities. If a security plots the security market line, it indicates a higher expected return for a given level of risk than the market. The security market line shows a positive linear relationship between returns and systematic risk as measured by beta (Boundless, 2016, para.2).... [tags: Capital asset pricing model, Financial markets]

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