How is beta calculated in CAPM?

1.	How is beta calculated in CAPM?
Answer» ERI = Rf + βi (ERm- Rf) Eri = Expected return of investment or security Rf = Risk-free rate βi = Beta of the investment or security ERm = Expected return of the market (ERm - Rf) = Market risk premium Beta measures the risks in the STOCKS that have been INVESTED. If a stock is RISKIER than the market, then the beta will be higher than one. If a stock has less risk, then the beta will be less than one.

Answer» ERI = Rf + βi (ERm- Rf)

Eri = Expected return of investment or security
Rf = Risk-free rate
βi = Beta of the investment or security
ERm = Expected return of the market
(ERm - Rf) = Market risk premium

Beta measures the risks in the STOCKS that have been INVESTED. If a stock is RISKIER than the market, then the beta will be higher than one. If a stock has less risk, then the beta will be less than one.

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How is beta calculated in CAPM?

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