# The Capital Asset Pricing Model Examples 4-6

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• says

Please post this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture about something different!

There are no lectures on mergers and acquisitions because they do not involve any technical work that is not already covered in other lectures – it is approach rather then learning new techniques.

So instead I am making recordings going through some past merger and acquisition questions. One has already been uploaded – question 1 from the December 2014 exam.

1. says

Hello John!

As I understood, in Example 7 we assume that there is no unsystematic risk so the total risk equals systematic risk (well-diversified portfolio). Why do we use correlation coefficient if the systematic risk is already given? Or maybe when we are given the correlation coefficient, which takes into account market imperfections, the assumption is not applicable and we adjust both the beta (12/4 * 0.7) and standard deviation (12 * 0.7) by the correlation coefficient, right?

• says

There is unsystematic risk in example 7 – the total risk is 12% but not all of this is systematic risk.

The coefficient of correlation = covariance of inv with mkt / (std devn (inv) x std devn mkt)

Beta = covariance of inv with mkt / (std devn mkt)^2

So…..beta = coeff of correlation x (std devn inv / std devn mkt)

(Std devn of inv in all the lines above is the total std devn of the investment – i.e. the measure of total risk in the investment)

The rest of the answer follows from there.

2. says

I must admit though that i find it more interesting when the tutor takes you through the question answering, its as if you are in a visual class. Trully appreciated. keep up the good work.

3. says

dont manage to watch the full video
it stops around minute 17
can u pls check?