Assume that the rate on a floater is set at LIBOR + 3%, that the floater portion of a class is 75 percent, and that the weighted-average coupon of the floater plus inverse floater should be eight percent. Determine the cap on the formula for the inverse floater that will accomplish this. 23% 26% 20% 28% 36%

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.