Briefly Explain, When Using the CAPM, Which Value Should Be

question 43

Essay

Briefly explain, when using the CAPM, which value should be used for the risk-free interest rate.

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Definitions:

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed expenses and generate earnings.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the activity of a business, such as sales volume or production levels.

Fixed Expenses

Costs that do not fluctuate with the volume of production or sales, such as rent, salaries, and insurance premiums.