Limitation of CAPM

Have you watched the lectures that go with the notes? (The notes are not to be used on their own - it is in the lectures that we explain and expand on the notes).

i watched the lecture sir.. u did not explain example 4 and the limitations

Sorry - I thought it was in the lecture. Betas are published for large quoted companies. So if we are investing in a large project,for example building ships, then we can use the beta of quoted shipbuilding companies on the assumption that the level of risk will be the same. But we cannot do that if, for example, we were just buying a new photocopier :-) When CAPM was proved it only looked at returns over one year, but we use the theory when looking at projects that last several years. (The answer to example 4 is in the notes, as are answers to all of the examples :-) )