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Risk of an asset = Rf + Beta (Rm - Rf) Explain the components of the equation?

Accounting Asset Pricing Risk Finance Management
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Question added by Abdulrasheed olabode , Senior Internal Auditor , IHS TOWERS LIMITED
Date Posted: 2017/03/04
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Abdulrasheed olabode
by Abdulrasheed olabode , Senior Internal Auditor , IHS TOWERS LIMITED

Rf  is the rate of return on a risk free security or rate applicable to government bonds

Beta is the beta factor or how a security or asset deviates from the market expectation

Rm is the rate of return of the market

(Rm - Rf) is the premium or discount ie the difference between the market rate and the risk free rate

 

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