The capital asset pricing model (CAPM) is used in finance to determine a theoretically appropriate price of an asset such as a security. The expected return on equity according to the capital asset pricing model. The market risk is normally characterized by the β parameter. Thus, the investors would expect (or demand) to receive:

Where:

E_s

The expected return for a security

R_f

The expected risk-free return in that market (government bond yield)

β_s

The se...