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Application and Plan for Purchase of Assets and Assumption of  Form

Application and Plan for Purchase of Assets and Assumption of Form

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in this video we're going to discuss several assumptions of the capital asset pricing model so just a quick review remember that the cap m formula is this right here and it's how we calculate the expected return of a security otherwise known as the cost of capital so we got the cost of capital equal to the risk-free rate of return plus the beta of the security times the market risk premium which is the expected return of the market - the risk-free rate so this is cap M it's based on several critical assumptions one of those assumptions is that investors are price takers and so they buy and sell securities at competitive prices so we're not assuming that any person and any one person can go and have an influence over the price of a security they're all price takers and there are competitive prices and when investors buy and sell securities they don't incur any transaction cost or any taxes whatsoever so we just assume away taxes when we're thinking about the cap m and we also assume tha

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