Riskier assets should pay more. The Capital Asset Pricing Model puts a number on it — see where any stock lands on the Security Market Line.
CAPM & BetaLive
pricing risk
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The Capital Asset Pricing Model says an asset's expected return equals the risk-free rate plus beta times the market risk premium. Beta measures how much a stock swings with the market — a beta of 2 is twice as volatile, and demands twice the premium. Educational tool, not financial advice.
Reading this result: Beta above 1 amplifies the market premium: this asset is expected to return 10.20%, above the 9% market, and to swing harder in both directions.
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How it works
CAPM prices risk: expected return = risk-free rate + β·(market return − risk-free rate). Beta measures an asset's volatility relative to the market — a beta above 1 is more volatile and commands a higher expected return, plotted along the Security Market Line. Educational tool, not financial advice.
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