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Explain how the capital asset pricing model

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Explain how the capital asset pricing model (CAPM) is used to estimate the cost of capital for a firm. What is systematic and unsystematic risk? What does the beta of a stock measure? What is an efficient portfolio? If an investor does not want to invest in small cap stocks, what potential level of returns is the investor giving up, based on historical data? Does the level of returns for small cap stocks compensate investors for the level of risk associated with these stocks?

Reference no: EM132497862

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