Could you please give a hint on:
when are we supposed to use CAPM vs MM when it comes the ACCA P4 exam? Is it that we use CAPM is we have a Beta in the question; otherwise it is MM?
I am losing it! I feel most of you would laugh, but I know 2 more students that can't answer the question.
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Modigliani and Miller vs. CAPM
9y ago#1It is not a question of M&M as against CAPM.
M&M deal with the affect of gearing. CAPM deals with the effect of business risk.
There is a CAPM formula that allows us to measure the business risk when we know the full risk (including gearing) and vice versa - but that formula effectively comes from M&M.
If you want to ask about specific questions then I will explain why they have done what they have done, but otherwise you really should watch my free lectures where I explain both M&M and CAPM (and the relationship) in detail.
(And you should suggest the same think to the other 2 students you know :-) )
Thank you! We did watch...
I guess we need to watch again or just be happy with only "13 exams":)
9y ago#3Do watch again, but also do ask if you have a problem on this in any specific past exam questions and I will explain.
But again, it is never a choice between M&M and CAPM - they are looking at two different (albeit connected) aspects of risk.
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