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. NEED ANSWER ASAP / ANSWER NEVER USED BEFORE The discussion topic concerns the calculation of...

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NEED ANSWER ASAP / ANSWER NEVER USED BEFORE

The discussion topic concerns the calculation of stock values using the capital asset pricing model (CAPM). Explain the CAPM model. The list of betas for a selection of stocks. we will use is the two firms Coca Cola and Energen,investigate both companies on google or online in general and  discuss whether the betas are what you would expect. Be sure to explain why or why not. Calculate the returns based on the CAPM model. Be sure to state your assumptions.

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Capital Asset Pricing Model

The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and cost of capital.

The formula for calculating the expected return of an asset given its risk is as follows:

ERi=Rf+βi(ERm−Rf)

where:ERi=expected return of investment

Rf=risk-free rate

βi=beta of the investment

(ERm−Rf)=market risk premium

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