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Explain the capm

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Reference no: EM132959179

Problem 1: Explain the CAPM and the link between systematic and unsystematic risk, as well as beta.

Problem 2: Calculate the predicted return on the company's shares using the facts from your research to see if your broker was correct.

Your broker advised you to add some shares of a particular company to your portfolio. The broker indicated that you could expect a 10% return on your investment in 5 years and you decide to analyze the proposed expected return utilizing the Capital Asset Pricing Model (CAPM). You researched and found that the rate of the 5-year treasury is .30%, and the market risk premium is 5.6% and the company's beta is 1.55.

Reference no: EM132959179

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