Definition
The Capital Asset Pricing Model (CAPM) calculates the expected return on an investment based on its risk level relative to the market.
Related Services
CAPM is used in portfolio management, risk assessment, and investment strategy planning.
Problem and Application
CAPM assumes a simplified market, which may not account for real-world complexities. Despite its limitations, it provides valuable insights into investment risk and returns.
Conclusion
CAPM remains a foundational tool in finance, guiding investors in making informed decisions by balancing risk and reward.
