Explain how the CAPM assists in measuring both risk and return.

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Capital Asset Pricing Model (CAPM), a popular model, helps you measure risk and returns. The relationship between risk and expected returns is described in this model. This can be used for calculating the return rate required to an asset based on the level of systematic risk. The CAPM model helps investors decide whether taking additional risks is worth it. It compares the risk associated with investing in particular securities to market returns. This model allows investors estimate the potential return on investments and also helps them evaluate how their portfolio performs against market expectations. CAPM also helps to identify underpriced securities. It compares the predicted returns with their actual returns.

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