Explanation:
The Capital Asset Pricing Model (CAPM) is appropriately used to determine the expected return of individual securities and portfolios based on their systematic risk (beta).
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Q.196 Steven Thomson is the head of the portfolio risk management team. His team has recently forwarded him an intra-departmental valuation report that contains expected return and standard deviation calculations of one of the diversified portfolios he manages. Given that the team has used different measures to compute the expected return of the portfolio, determine which of the following is appropriate for measuring the expected return of individual securities.
A
Sharpe ratio
B
CML
C
CAPM
D
Beta
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