Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Principal: $15,800
Interest rate: 6%
Compounded quarterly
Calculate the effective rate (APY) of interest for 1 year
Effective annual rate of interest is the real return on the savings account when the effects of compounding are taken into account.
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