Financial risk and return
Free IMA CMA Part 2 (Strategic Financial Management) lesson in Corporate Finance. 11 min read, ~1,637 words.
Total risk = systematic + unsystematic. Only systematic (market) risk is priced because firm-specific risk diversifies away. CAPM: Expected return = R_f + β(R_m − R_f); the bracket is the market risk premium and market beta is 1.0 by definition. Realized, expected, and required return are distinct; CAPM yields the...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 2B1
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