BCD Company offer its investors option contracts to buy their shares at a price of P50. Currently, the value of their stocks in the market stands at P60. The 52-week nigh of the share price is P83 and its 52-week low is P47. The treasury bill issued by the government yields 8.25% currently.

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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.