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Discuss why the parameter beta (B) is important in the Capital Asset Pricing Model, which often takes the following form: E(R) = RF + B
Discuss why the parameter "beta" (B) is important in the Capital Asset Pricing Model, which often takes the following form: E(R) = RF + B [E(RM) - RF]. In your answer, you may discuss how different firms, depending on their industry, can take on relatively different betas and what this means from an investor's point of view.
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