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Sagot :
CAPM is widely used as a means of estimating expected returns is correct.
Why CAPM is widely used?
The expected return on an investment, given its systematic risk, is estimated by the Capital Asset Pricing Model (CAPM). The CAPM model is frequently used to calculate expected returns. It is often regarded as a considerably more accurate approach to determining the cost of equity than the dividend growth model (DGM) since it expressly takes into account a company's level of systematic risk in relation to the entire stock market. On the concept of systemic risk, it is based. It talks about the anticipated return on a security that is equal to the risk-free return plus a risk premium.
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