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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Capital Asset Pricing Model (CAPM)


Capital Asset Pricing Model or CAPM is a model that prices securities in terms of the relative risk and return offered by the security. There are nice, complex equations that can be used to express this pricing model (if you're into that sort of thing), but the important thing to remember is that CAPM recognizes that investors need to be rewarded for risk and for the value of their money in terms of time.