Question

Can someone please help me work out the CAPM formula using this formula

?[?? ] = ?? + ??(?[??] − ??),

Thank you

Answer 1

The expected return on a stock is calculated using the Capital Asset Pricing Model (CAPM). It helps to understand the return expected by investors in the business.

The formula is given below:

Ke=Rf+$\beta$[E(Rm)-Rf]

where:

Rf=risk-free rate of return

Rm=expected rate of return on the market.

$\beta$= Stock’s beta

In case of any query, kindly comment on the solution