CAPM
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Capm
DeNarius Thomas
Business Finance
October 30, 2000
Capital Asset Pricing Model
The theory of the Capital Asset Pricing Model - CAPM is pretty basic. This theory though
it seems very small is a very important part of the business world. The expected return
on a long futures position depends on the Beta of that individual futures contract. If
the Beta is greater than 0, the futures price should rise over time. If the Beta is equal
to 0, the futures price should remain the same over time. If the Beta is less than 0, the
futures price should decline over time.
The Capital Asset Pricing Model - CAPM shows risk in a particular asset. With the Capital
Asset Pricing Model - CAPM, traders can avoid much of the risk they receive because this
broadens their chances. Therefore, only unavoidable risk should or will be compensated.
Nevertheless, even after a trader expands his portfolio, some risk will remain...