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The CAPM model is used to calculate RRR the beta version of the original. Beta is the risk factor of holding. In other words, beta attempts to measure the risk of a stock or investment over time. Shares with a beta greater than 1 are considered riskier than the market as a whole (represented by the S&P 500), while stocks with a beta greater than 1 are considered less risky than the overall market.
The formula also uses the risk-free rate of return, which is usually the yield on short-term US Treasury notes. The final variable is the market rate of return, which is usually the annual return on the S&P 500. The RRR formula using the CAPM model is as follows: