Beta in the CAPM
What does this low beta do in the CAPM, compared to a stock with a beta of 1.1?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/beta-in-the-capm-7dt4
Impact of lower beta in the CAPM
According to Investopedia.com, the Capital Asset Pricing Model (CAPM) "describes the relationship between risk and expected return and... is used in the pricing of risky securities." The formula used for CAPM is shown below:
? Ke = Required return on common stock
? Rf = Risk-free rate of return; usually the current rate on Treasury bill securities
? B = Beta coefficient
Km = ...