Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

ACCA December Exams

Post comments & Vote in Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March 2025 exams.
Get your discount code >>

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

Reader Interactions

Comments

    • 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.)

  3. 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?

  5. 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.

  6. 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.

  7. 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?

  8. 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!

    • 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).

  12. 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.

    • 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.

    • 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.

  15. 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

    • 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.

      • 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

      • 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. 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.

  17. 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.

  18. 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?

  20. 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.

Leave a Reply