required rate of return (rrr)

How is RRR Calculated?

The RRR can be calculated using various methods, but one common approach is the Capital Asset Pricing Model (CAPM). The formula for CAPM is:
\[ RRR = Risk-free rate + Beta \times (Market return - Risk-free rate) \]
- Risk-free rate: The return on a risk-free investment, usually government bonds.
- Beta: A measure of the investment's volatility compared to the market.
- Market return: The average return of the market.

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