Capital Asset Pricing Model Formula
Rate of Return Expected = Risk-Free Premium + Beta * (Market Risk Premium)
[Tex]R_i=R_f+\beta_i(R_m-R_f)[/Tex]
Ri = Expected return on the asset
Rf = Risk-free rate of return (usually the yield on government bonds)
β = Beta of the asset (measure of its volatility compared to the market)
Rm = Expected return on the market portfolio
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