Definition Risk-free Rate Systematic Risk 
Andrew Stolz
AUGUST 5, 2020
Definition of Capital Asset Pricing Model. It helps an investor understand what to expect to earn in relation to the risk-free rate and the market return. CAPM assumes that the minimum a rational investor would earn is the risk-free rate by buying the risk-free asset. E(r) = Rf + ??(Rm
Andrew Stolz
AUGUST 5, 2020
Definition of the Cost of Equity. To compensate for the risks that shareholders take, firms pay them in return. In other words, the cost of equity is the rate of returns a firm pays to its shareholders. Risk-free rate . The systematic risk of the security (Beta). The growth rate of dividends .
Equidam
APRIL 22, 2025
10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23] 23] Risk-Free Rate: Tied to government bond yields (e.g.,
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