What is the formula for the Capital Asset Pricing Model?
- A Risk-free rate + beta x (market return - risk-free rate)
- B Risk-free rate x beta + market return
- C Market return - risk-free rate
- D Beta x market return
Answer
Risk-free rate + beta x (market return - risk-free rate)
CAPM adds a risk premium to the risk-free rate. The term in brackets is the market risk premium, scaled by the asset's beta.





