Question
According to the CAPM model, Expected Return = Risk
free rate + Risk premium. Here, what does the risk-free rate compensate the investor for?Solution
The CAPM compensates investors for the time value of their money. In theory, the risk-free interest rate is the minimum return an investor expects for any investment because he will not accept additional risk unless the potential rate of return is greater than the risk-free rate. In practice, risk free rate does not exist because even the safest investments carry a very small amount of risk. However, the long-term G-sec rate is used as a proxy to risk-free rate of return (in India 10-year G-sec rate is used as risk free rate).
How many trade and strategic agreements were signed during the IndiaâSingapore bilateral roadmap launch?
Who was honored with the Lata Deenanath Mangeshkar award for their contributions to the nation?
Recently IDS has unveiled the Bharat Blockchain Network and Polyversity . IDS is based in which country?
The Madhya Pradesh governmentâs âBrindavan Gramâ scheme primarily focuses on promoting:
- Which PM-led initiative is India Steel 2025 aligned with?
What is the primary objective of Indiaâs draft âclimate finance taxonomyâ framework?
Which Indian city was ranked among the two most polluted cities in the world in the "World Air Quality 2022" report released on March 15?
Which country launched the SLIM Moon Mission to investigate the Moon's origins?Â
When did the IEPFA launch the âSaksham Niveshakâ campaign?
UP set to get its third international cricket stadium at which place?
Relevant for Exams:
