Capital Asset Pricing Model - How Detailed?

[cfanewb92]

Should we just know the formula alone or should we also understand how the formula is derived? I understand each term and how they relate to one another, but do we have to know how it relates to the SML, etc?

 

[S2000magician]

Yes, you have to know how CAPM relates to the SML, CML, and individual CALs.
I wrote an article on this stuff that may be of some help: http://financialexamhelp123.com/cal-vs-cml-vs-sml/

 

[cfanewb92]

Thanks for the link, you’ve written it up incredibly simply! And thanks for another great response

 

[S2000magician]

You’re quite welcome.