Briefly Explain the Capital Asset Pricing Model

question 19

Essay

Briefly explain the capital asset pricing model.

---

Definitions:

Moral Hazard

A situation where one party is more likely to take risks because they do not bear the full consequences of their actions, often seen in insurance and finance.

Let Themselves Go

A phrase describing individuals who have stopped maintaining their appearance or health.

Spouses

Partners in a marriage or marital-like relationship, legally recognized in many jurisdictions.

Moral Hazard

Moral hazard occurs when one party to an agreement engages in risky behavior or fails to exercise responsible care because this party knows another bears the consequences.