The Capital asset pricing model (CAPM), a textbook model that is still extensively applied in the business, uses a formula that determines and quantifies investment conditions. However, the model is also believed to be based on very limiting assumptions, thus rendering it ineffective in many cases and the current complexity of the economic situation. Further in the essay this hypothesis will be elaborated on, explaining why the model in question is not effective, what the industry experts are saying about its effectiveness, and why, in spite of that, it is still applied to determine asset returns and risks. The particulars of the model and its proprietary formula will be presented and explained in the first part of the essay, which will set the course for further elaboration on its uses. The report will touch upon the connection between the CAPM and the ongoing developments in the financial industry, describing how to make sense of the current happenings using the criteria set by the model. Capital asset pricing model, basically a “model of risk and return” (Brealey, Myers and Marcus 2009, p. 352), has been an industry standard for a long time.