how to measure risk

how to measure risk - required by an investor given the...

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* We know how to  measure  risk, using  standard deviation for overall risk and  beta for market risk. * We know how to  reduce  overall risk,  using diversification so we are left  with only  market risk in our portfolio. * STILL NEEDED     :  How to  price  risk so  we will know how much extra return  we should require for accepting extra  risk. The return on an investment 
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Unformatted text preview: required by an investor given the investment’s risk . Required rate of return This linear relationship between risk and required return is known as the Capital Asset Pricing Model (CAPM). Required rate of return k j = k rf + j *(k m- k rf ) k j : the Required Return on security j...
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This note was uploaded on 11/23/2011 for the course BUS M 301 taught by Professor Jimbrau during the Summer '11 term at BYU.

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how to measure risk - required by an investor given the...

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