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The capital asset pricing model (part 1) – ACCA (AFM) lectures

VIVA

Reader Interactions

Comments

  1. maidei says

    December 5, 2023 at 10:43 am

    so well explained, thank you so much Sir Moffat, appreciated.

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  2. zabihullahacca says

    March 12, 2023 at 8:31 am

    Hello Mr Moffat
    Can I pass AFM with your Lectures , open tuition notes and Kaplan Kit, and is there any major syllabus changes as open tuition lecture are from 4 years ago.

    Thanks

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    • John Moffat says

      March 12, 2023 at 9:07 am

      Some of the lectures are certainly a few years old, but when there have been syllabus changes the lectures and notes have been amended accordingly. There is obviously no point in re-recording lectures on topics for which the syllabus has not been changed 🙂

      You can pass the exam using our lectures and notes, and a Revision/exam Kit. But in addition is is essential to read all of the technical articles on the ACCA website (and to ask in our Ask the Tutor Forum if you are unclear about anything in any of them.)

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  3. rujingcui says

    October 11, 2022 at 5:32 pm

    Hello Sir, regarding on partA example 4. I am not very clear about the “under-valued” part. As my understanding, if the actual return is 8%, and theoretical return is 7.6%, then the risk is over stated, right? So is it correct that when actual return is higher than theoretical return, the market price of the share will be lower because the return given out to shareholder is larger when total earning is the same?

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    • John Moffat says

      October 12, 2022 at 8:03 am

      The market value is the present value of future dividends discounted at the required return. So if the actual return is higher than it should be, the market value will be lower than it should be.

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  4. abokor says

    September 18, 2022 at 9:52 am

    Hi, hope u are keeping well

    when calculating Alpha values, we know the theoretical return but the question is how the actual return has been determined.

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    • John Moffat says

      September 18, 2022 at 10:16 am

      By looking to see what the return currently is using the current market value on the stock exchange.

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      • abokor says

        September 18, 2022 at 3:27 pm

        Thanks

      • John Moffat says

        September 18, 2022 at 4:11 pm

        You are welcome.

  5. Kyle says

    June 22, 2021 at 9:15 pm

    Hi John,

    I hope this post finds you well in the current climate.

    Just wanted to touch base on part b of example 3, as it does not appear to be covered in the lectures.

    When calculating the overall return Matiss will receive, I would assume that we would use the overall beta for his investments of 1.26, but the answer in the notes appears to use the beta of 1.2 from Matiss’ investment in A plc.

    It would be great if you could explain why the beta of 1.2 should be used, if indeed it should.

    Many thanks,

    Kyle

    P.s. My answer, using the overall weighted average beta of 1.26, matches the notes. I will assume the missing 6 is just an error in the answers section, unless you state otherwise.

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    • John Moffat says

      June 23, 2021 at 7:38 am

      It is a typing error – thank you for letting me know. I will have it corrected.

      The final answer of 23.12% is correct.

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  6. njweng27 says

    March 15, 2021 at 8:14 pm

    Thanks very much Sir John, you are an amazing lecturer.

    As a self study stay at home mom, you are making things very easy for me. I was scared at the beginning but so far, I’m actually understanding and enjoying. I actually lie in bed and reminisce your lectures. Hoping I pass on first attempt in June or Sept 2021 depending on my SBR results for March 2021.

    Again thanks very much Sir, God bless you.

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    • John Moffat says

      March 16, 2021 at 9:21 am

      Thank you for your comment 🙂

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  7. Noah098 says

    October 21, 2020 at 9:35 am

    Also sir just one more thing the Risk free rate of return i understand is basically the rate of return offered by G-Secs, but was curious to know if its exactly the 91days treasury bills rate?

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  8. Noah098 says

    October 21, 2020 at 9:29 am

    Sir don’t you think the share is overvalued if its currently giving 8% return(perhaps due to speculation) as opposed to what should be giving i.e. 7.6%? So should not we be shorting the stock instead of going Long?

    many thanks!

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  9. yashgupta04 says

    September 17, 2020 at 10:57 am

    Hello John. Thanks for the great lectures.
    Can you please explain again why the shares are undervalued

    Thanks
    yash

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  10. hardikundu says

    August 22, 2020 at 9:41 am

    Hi John,
    Hope you are safe and well.

    Can you please tell me how to prepare for theory? Theory as in for AFM and not particularly the above topic.

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    • John Moffat says

      August 22, 2020 at 3:33 pm

      Listen to the lectures, read all the technical articles on the ACCA website, and most importantly practice all the questions in your Revision Kit and learn from the answers to the written parts (and for past exam questions check on the marking scheme which points were getting the marks).

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  11. adeelilyas says

    July 14, 2020 at 6:28 pm

    Sorry i am asking this question here can i use revision kit of bpp of previous session.? Like june 2020. I dont think there are changes to the syllabus

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  12. Vicky1117 says

    April 20, 2020 at 9:51 am

    Thank you so much for offering such a wonderful lecture and it really help me to taking P4 in Sep 2020 as the exam entry for Jun 2020 has to be cancelled due to covid-19. Thanks for inspire me to learn and that is a task that my lecturer dont possess even i spent SG 1,200 for the P4 course at the University, Thanks so much John.

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    • John Moffat says

      April 20, 2020 at 1:02 pm

      Thank you very much for your comment 🙂

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  13. hurmillraymond@gmail.com says

    February 18, 2020 at 7:32 pm

    Hi sir,
    I noticed in the practise kit the risk free rate is also referred to as the base rate.
    Is there any other name it can be called?

    Thank you.

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    • John Moffat says

      February 19, 2020 at 8:50 am

      The risk free rate is not normally referred to as the base rate. There may be occasions when a question refers to a base rate but whether or not this is the risk free rate depends on what is written in the question.

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  14. obalolu says

    November 6, 2019 at 10:11 pm

    Thanks for the lecture. please sir, what is the difference between asset beta and equity beta. And when using CAPM, are we to use asset beta or equity beta

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    • John Moffat says

      November 7, 2019 at 7:59 am

      I so explain this in the lectures that follow.

      The asset beta measures the risk of the business of the company, whereas the equity beta measures the risk of the shares (which are more risky because of the gearing).

      Which you use depends on what you are doing, and again this is all explained in the following lectures.

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  15. greenzstarr says

    February 3, 2019 at 4:14 am

    How do i derive equity or asset beta for the remaining business if the company is selling a part of the business. e.g if a company is in food and travel services and total equity beta is 1.5 but the ba of travel is .97. How do i get the equity beta for the remaining company. Please shed some light. Thanks

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    • touseefalam1 says

      October 28, 2019 at 6:34 pm

      actually there is a whole topic missing in these lectures which is “impact of diversification in the calculation of beta factor and ultimately the calculation of WACC” and it has three cases. its very sad to say that this whole topic is not covered here, making this platform very unrelaible.

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      • John Moffat says

        October 29, 2019 at 5:36 am

        Nonsense.

        The three cases you refer to were removed from the syllabus several years ago.

        Everything relevant for the exam is covered in these lectures.

        As regards the comment above yours to which you were replying, this is of course explained in these lectures

      • osuja says

        July 28, 2020 at 6:09 am

        my friend if you are not satisfied with the lecture go else and stop saying nonsense. i passed all the courses i have done using this platform , and Mr john has always be the best tutor .

        This is very rude and unprofessional to comment in such manner . For your record many have used this platform and did better than those that went to kaplan or other relevant tuition providers i am a testimony ok my friend

        i will advise you to desist from this attitude alright.

        Thanks.

  16. Denay says

    January 16, 2019 at 9:58 am

    When using the CAPM formula, when inserting the return from the market & the risk free rate, are we to use to whole numbers or percentages in the formula?

    It tends to trip me up.

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  17. lucie13 says

    January 14, 2019 at 1:23 pm

    Dear John

    Great lecture great notes. I am actually going to retake in March and I found your updated notes are even better. (I used the older version previously). Hope it will be ok this time.

    Thanks for your great work.

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    • John Moffat says

      January 14, 2019 at 1:44 pm

      Thank you for your comment, and I hope all goes well for you in March.

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  18. bucheeri88 says

    October 29, 2018 at 7:33 pm

    Hello sir. I have a question relating to the Market premium. Is it possible in real life, that the market premium is negative (ie the market rate is lower than the risk free rate). In this case, what would be the reason for a negative market premium?

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    • John Moffat says

      October 30, 2018 at 7:49 am

      No – the market as a whole will always give a premium above the risk free rate 🙂

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  19. iamm says

    October 26, 2018 at 12:53 pm

    Thanks a lot. I’m happy you are P4 tutor. Your explanations are the best I’ve ever listen to. I hope I’ll pass P4 in December.

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    • John Moffat says

      October 26, 2018 at 3:02 pm

      Thank you very much for your comment 🙂

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    • ayush13 says

      December 29, 2018 at 8:25 am

      Truly!!!

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  20. ashlan says

    July 31, 2018 at 4:47 pm

    I really struggled with CAPM at F9 (or FM), especially the “market premium”, but the way Mr Mophat explains it here is 100% clear and understandable. Incredibly well demonstrated, thank you.

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    • John Moffat says

      July 31, 2018 at 5:04 pm

      Thank you for your comment 🙂

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      • danconsult says

        August 30, 2018 at 8:01 pm

        Thanks Mr Moffat. You have made my life easier as I prepare for my last paper.I really did not understand what was going on with these gear/ungear stuff

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