Capital Asset Pricing Model Calculator (CAPM)
The valuation of the capital asset pricing model uses a variation of discounted cash flows. However, there are varied ways to measure the investment beta co efficient. The formula is: Kc = Rf + beta x ( Km - Rf ) where Kc is the risk-adjusted discount rate (also known as the Cost of Capital); Rf is the rate of a "risk-free" investment, i.e. cash; Km is the return rate of a market benchmark, like the S&P 500. Risk and the Capital Asset Pricing Model Formula In order to understand the capital asset pricing model calculator ; one needs to have an understanding of risk on investment. Typically, Applicant securities carry a risk of depreciation which is equal to a loss of investment to the investor. Generally, some securities have more risk than others as compared to the additional risk. The risk involved when evaluating a particular stock is accounted for in the capital asset pricing model formula with beta. Beta is the adequate term used...