Question

subject the best ways to get information to use the CAPM to estimate cost of capital...

subject the best ways to get information to use the CAPM to estimate cost of capital for a well-diversified investor? In Malaysia

For example,
Risk Free is come from Treasury Bill
Beta is come from the return on market against on asset ( it can get from KLCI )
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Answer #1

CAPM model i.e. Capital Asset Pricing Model helps us in calculating return expected from a security. It is calculated as follows:

Expected Return = Risk free return+ Beta (Expected return of market - Risk free return )

Where ,

Risk free return = Normally government securities are considered as risk free

Beta = It is degree of responsiveness of a particular stock in relation to movement in overall market

Risk premium= Expected return of market less Risk free rate

is the rate of return expected over and above risk free rate.

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