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What is the formula for the Capital Asset Pricing Model?

  1. A Risk-free rate + beta x (market return - risk-free rate)
  2. B Risk-free rate x beta + market return
  3. C Market return - risk-free rate
  4. 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.

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