omg Wow! So easy clicked here http://mbabullshit.com/ for CAPM or Capital Asset Pricing Model Formula If You Like My Free Videos, Support Me at https://www.patreon.com/MBAbull Imagine you have a friend named Bob with his money safely deposited in a bank at a 5% interest rate per year and that you have a scary and risky company which also earns an average 5% profit for owners or investors per year. Can you convince Bob to withdraw his money from the bank and invest in your business? No way! If your business is riskier than the bank, then Bob would want an average return much bigger than 5%. Now what if... Bob also has some money invested in the general stock market, which is kinda risky, but not as risky as your scary company... and he earns an average profit of 8% per year. Can you offer Bob also 8% to convince him to sell his stock market portfolio and invest in your company instead? Again, no way! If your company is riskier and scarier than the general stock market, then you would have to offer Bob an average return higher than 8%, to reward Bob for his higher risk. http://www.youtube.com/watch?v=gzxKd2S2MdU So the question now is... exactly how much average % return should you offer Bob, to make his investment worth his risk in your scary company? This % is called your "cost of equity"... and we calculate it using the CAPM or Capital Asset Pricing Model Formula. The Capital Asset Pricing Model or CAPM formula factors in Bob's risk and return from his other investments, and then tells us how much Bob should reasonably expect from your riskier company. That's why your "cost of equity" is also called your investor's "expected return." Would you like learn the CAPM with more analysis and detail as well as how to calculate it the EASY way? Check out my free step-by-step tutorial video and download my free cheat-sheet on CAPM at MBAbullshit.com. See ya there!