Instructor’s Manual Chapter 13 Page 151 CHAPTER 13 THE CAPITAL ASSET PRICING MODEL Objectives Explain the theory behind the CAPM. Explain how to use the CAPM to establish benchmarks ...
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...Instructor s manual chapter page the capital asset pricing model objectives explain theory behind capm how to use establish benchmarks for measuring performance of investment portfolios infer from correct risk adjusted discount rate in discounted cash flow valuation models apt and its relationship outline brief determinants premium on market portfolio beta premiums individual securities using selection regulating rates return extensions modifications alternatives summary has three main implications equilibrium everyone relative holding risky assets are same as size is determined by aversion investors any equal times whether or not strictly true it provides a rationale very simple passive strategy diversify your holdings proportions mix this with free achieve desired reward combination used management primarily two ways logical convenient starting point allocation security benchmark evaluating ability basis corporate finance determine appropriate firm budgeting decisions also fair inves...