Capital Asset Pricing Model (CAPM)
Capital Asset Pricing Model (CAPM) is a model which utilizes the measure of systematic risk, 'B' to price assets. The expected rate of return is given by:
Ke = Rf + B x {Rf - Rm}
Where:
Rf = Risk free rate of return,
Rm = Market rate of return,
Ke = Expected rate of return,
B = Beta value for the stock