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).
Which is the top ranked city in the 11th edition of the TomTom Traffic Index?
What is the total outlay of the "Scheme for Expansion and Modernization of Fire Services in the States" launched by the Ministry of Home Affairs?
How many new branches has HSBC India received RBI approval to open?
What is the primary objective of the UDAN scheme launched by the Ministry of Civil Aviation in 2016?
The International Hockey Federation (FIH) appointed P.R. Sreejesh and which other individual as co-chairs of the FIH Athletes Committee?
How many archaeological sites along the Saraswati River’s path have been identified in Haryana?
What is the main aim of SEBI and IEPFA’s ‘ Niveshak Shivir ’?
Blackstone has signed a binding agreement to acquire a controlling stake in Care Hospitals from TPG, valuing the India and Bangladesh-based hospital cha...
What distinguishes Agnikul Cosmos' Agnibaan Sub Orbital Technology Demonstrator (SOrTeD) launch as a milestone in India's space exploration efforts?
What is the scheduled timeline for ISRO’s first manned Gaganyaan mission, as per the revised plan?
Relevant for Exams:
