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What Is the Capital Asset Pricing Model (CAPM)?

By Jeremy BowmanUpdated Oct 8, 2025 at 3:22 AM

Key Points

  • CAPM calculates expected stock returns using the risk-free rate, stock beta, and market return.
  • The riskier the stock, the higher the return investors should demand.
  • CAPM aids in investment analysis but simplifies reality, not predicting exact returns.

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