**Capital Asset Pricing Model (CAPM) Definition & Application Wiki**

Last Updated by WikiWealth

# Short Definition

The Capital Asset Pricing Model (CAPM) is used in finance to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's non-diversifiable risk. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systemic risk or market risk), often represented by the quantity beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset.

# Long Definition

# See Dictionary Terms

- Capital asset pricing model
- Weight Average Cost of Capital (WACC)
- Beta Coefficient
- Alpha
- Country Risk Premium
- Debt
- Debt Percentage of Capital
- Discount Rate
- Equity Capital
- Equity Percentage of Capital
- Equity Risk Premium
- Free Cash Flow
- Margin of Safety
- Required Return of Debt
- Required Return of Equity
- Risk Free Rate
- Value Investing

# See Academic Resources

- WACC Discount Rates
- Fair Values
- WACC Discount Rate Model
- Private Equity Discount Rate
- WACC Calculator
- Beta Calculator
- Risk Free Rate 1
- Risk Free Rate 2
- Risk Free Rate 3
- Risk Free Rate 4
- Cost of Debt (required return)
- Search for Betas
- Treasury Yield
- Cost of Debt - Corp Bond Yields
- Bond Yields
- US Treasury Yields
- Daily US Treasury Yields

**Source:** http://en.wikipedia.org/wiki/Capital_Asset_Pricing_Model