Capital Asset Pricing Model (CAPM)
Re = Rf + B*(Rm-Rf)
Re = Expected return on equity
Rf = Risk-free rate; e.g. 10-year Treasury bond rate
Rm = Market return; e.g. historical return on S&P 500
Rm – Rf = Market risk premium
B = Leveraged Beta
Re = Rf + B*(Rm-Rf)
Re = Expected return on equity
Rf = Risk-free rate; e.g. 10-year Treasury bond rate
Rm = Market return; e.g. historical return on S&P 500
Rm – Rf = Market risk premium
B = Leveraged Beta
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