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==The Capital asset pricing model==  
==The Capital Asset Pricing Model==  


The rate of return,r, from an asset is given by  
The rate of return,r, from an asset is given by  


::::r&nbsp;=&nbsp;''r''<sub>f&nbsp;</sub>+&nbsp;β(''r''<sub>m&nbsp;</sub>-&nbsp;''r''<sub>f</sub>)
::::r&nbsp;=&nbsp;''r''<sub>f&nbsp;</sub>&nbsp;β(''r''<sub>m&nbsp;</sub>&nbsp;-&nbsp;''r''<sub>f</sub>)


''r''<sub>f&nbsp;is the risk-free rate of return
''r''<sub>f</sub>&nbsp; is the risk-free rate of return


''r''<sub>m&nbsp; is the equity  market rate of return  
''r''<sub>m</sub>&nbsp; is the equity  market rate of return  


and ''r''<sub>m&nbsp;</sub>-&nbsp;''r''<sub>f</sub>  is known as the ''equity risk premium"
(and ''r''<sub>m&nbsp;</sub>-&nbsp;''r''<sub>f</sub>  is known as the ''equity risk premium'')


==Gambler's ruin==
==Gambler's ruin==

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Tutorials relating to the topic of Financial economics.

The Capital Asset Pricing Model

The rate of return,r, from an asset is given by

r = r β(r - rf)

rf  is the risk-free rate of return

rm  is the equity market rate of return

(and rrf is known as the equity risk premium)

Gambler's ruin

If q is the risk of losing one throw in a win-or-lose winner-takes-all game in which an amount c is repeatedly staked, and k is the amount with which the gambler starts, then the risk, r, of losing it all is given by:

r  =  (q/p)(k/c)

where p  =  (1 - q),  and q  ≠  1/2

(for a fuller exposition, see Miller & Starr Executive Decisions and Operations Research Chapter 12, Prentice Hall 1960)