Whether the market risk premium used in the Capital Asset Pricing Model (CAPM) was negative when the S&P 500 has a negative return. Introduction: CAPM is an equation derived from the security market line that attempts to explain the relationship between the risky asset’s expected return and its beta coefficient. Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

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Chapter 12, Problem 9P

Summary Introduction

To discuss: Whether the market risk premium used in the Capital Asset Pricing Model (CAPM) was negative when the S&P 500 has a negative return.

Introduction:

CAPM is an equation derived from the security market line that attempts to explain the relationship between the risky asset’s expected return and its beta coefficient.

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

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