Capital Asset Pricing Model - How Detailed?

CFA Level I Portfolio Management
#1

Should we just know the formula alone or should we also understand how the formula is derived? I understand each term and how they relate to one another, but do we have to know how it relates to the SML, etc?

#2

Yes, you have to know how CAPM relates to the SML, CML, and individual CALs.

I wrote an article on this stuff that may be of some help: http://financialexamhelp123.com/cal-vs-cml-vs-sml/

#3

Thanks for the link, you’ve written it up incredibly simply! And thanks for another great response

#4

You’re quite welcome.