One Key Conclusion of the Capital Asset Pricing Model Is

question 65

True/False

One key conclusion of the Capital Asset Pricing Model is that the value of an asset should be measured by considering both the risk and the expected return of the asset, assuming that the asset is held in a well-diversified portfolio.The risk of the asset held in isolation is not relevant under the CAPM.

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Definitions:

Discount Rate

This rate is essential in discounted cash flow analysis for calculating the present value of future cash flows.

Present Value

The immediate financial worth of an expected future sum of money or cash flows, discounted with a predetermined rate of return.

Insurance Settlement

The payment made by an insurance company to a policyholder or claimant as compensation for a covered loss.

Discount Rate

in finance, refers to the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.