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Unformatted text preview: CAPM = Rf + Beta(Rm-Rf) Draw SML Diversifiable, unsystematic, firm specific, idiosyncratic risk Can be mitigated via diversification. Draw diversification graph Build up Method (Typically for smaller firms and under diversified investors). RRR = bond yield + equity risk premium + micro-cap risk premium + start-up risk premium...
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- Winter '11
- Finance, Risk premium, Systematic r isk, Risk Premium CAPM, micro-cap risk premium, lit tle Stats