Security Market Line: Difference between revisions
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imported>Doug Williamson (Create page. Source: ACT FMM material 6.2.1, section 4, pp5-7.) |
imported>Doug Williamson m (Spacing.) |
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Ke = Rf + beta x [Rm-Rf] | Ke = Rf + beta x [Rm-Rf] | ||
Where: | Where: | ||
Revision as of 16:50, 24 August 2013
(SML).
The Security Market Line is a graphical presentation of the Capital asset pricing model formula:
Ke = Rf + beta x [Rm-Rf]
Where:
Ke = cost of equity.
Rf = theoretical risk free rate of return.
Beta = relative market risk.
Rm = average expected rate of return on the market.
