What is the capital asset pricing model (CAPM)?

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What is the capital asset pricing model (CAPM)?

The Capital Asset Pricing Model (CAPM) is a financial model that determines the expected return on an investment based on its systematic risk. It calculates the required rate of return by considering the risk-free rate of return, the beta coefficient of the investment, and the expected market return. The CAPM helps investors assess the potential risk and return of an investment and is widely used in the stock market to determine the appropriate price of a security.