Sign In
Not register? Register Now!
Essay Available:
Pages:
1 page/≈275 words
Sources:
1 Source
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 4.68
Topic:

Finance 301: The Capital Asset Pricing Model (CAPM)

Essay Instructions:

                                             Thread Discussion Fin 301

 

READ about CAPM and Answer the following question Research on the Internet and show reference

 

Now that you have read about the CAPM, would you ever use it to make personal investment decisions?  How can an individual investor use or think about CAPM?  

 

Consider the following:  

 

WHAT IS THE MAIN MESSAGE OF THE CAPM? IT EVOLVES FROM THE NOTION THAT INVESTORS IN GENERAL AREN'T STUPID: THEY DIVERSIFY THEIR INVESTMENT FUNDS INTO A WELL DIVERSIFIED PORTFOLIO. MORE SPECIFICALLY - THE MAIN MESSAGE OF THE CAPM IS THAT THE RATE OF RETURN ONE SHOULD EXPECT TO EARN ON A PARTICULAR INVESTMENT IS ONLY RELATED TO THE SYSTEMATIC RISK OF THE SECURITY, NOT TO ITS TOTAL RISK. WHEN YOU PURCHASE A STOCK (BECAUSE YOU LIKE IT OR BECAUSE YOU GOT A 'TIP'),     YOU'LL BE EXPOSED TO THE TOTAL RISK OF THIS STOCK, BUT THE MARKET THEORY IMPLIES THAT YOU'LL ONLY BE COMPENSATED FOR A SMALL PROPORTION OF THAT RISK. HENCE, IF YOU DO LIKE RISK YOU SHOULD INVEST IN A WELL DIVERSIFIED RISKY PORTFOLIO WITH MANY SECURITIES HAVING A HIGH BETA, RATHER IN AN INDIVIDUAL STOCK.  NOW GO BACK TO THE INITIAL QUESTION AND PRESENT YOUR THOUGHTS...

 

Do research on the Internet and show the reference for the information. Don't forget to respond to a colleague's posting also.

 

Professor’s Note: In addition to searching the Internet for text related to this threaded discussion, please watch the following video (click on the following link

Essay Sample Content Preview:

Finance 301 thread discussion
Student’s Name:
Institutional Affiliation:
Finance 301 thread discussion
The Capital Asset Pricing Model (CAPM) is a model that showcases the relationship between risk and the expected returns. The relationship determines the appropriate price for an investment. CAPM assumes that money has a time and risk value; therefore, any risky investment must be in a position to compensate the investor’s time and money that has been tied up in the investment CITATION Fre13 \l 1033 (Weston, 2013).
An investor can make investment decisions using CAPM. CAPM states that the variance of the returns is the measure of risk and the expected returns from an investment is the reward. In this case, given two investments with similar expected returns but different variances, the investor chooses the investment with a lower variance. On the other hand, presented with two investments with a similar variance of returns but with different expected returns, the investor will choose the one with a higher expected return CITATION F...
Updated on
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:
Order

👀 Other Visitors are Viewing These APA Essay Samples:

HIRE A WRITER FROM $11.95 / PAGE
ORDER WITH 15% DISCOUNT!
Order Now