Capital Asset Pricing Model Template
Calculate the expected return on an investment given the risk-free rate and a risk premium based on the beta of that investment.
- The Capital Asset Pricing Model (CAPM) is a widely-used return model that can be easily calculated and stress-tested.
- It describes the linear relationship between the expected return on investment and its risk.
- CAPM is generally considered a better cost of equity calculation method than the dividend growth model (DGM) as it explicitly considers a company’s level of systematic risk relative to the stock market as a whole.
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