Great job by a student of mine on beta, and the CAPM.

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CAPM (Capital Asset Pricing Model) It describes the relationship between risk and expected return of a security. Its an integral part of WACC as it calculates the cost of equity & WACC can be used to find the NPV of the future cash flows of an investment and to further calculate its enterprise value and finally its equality value.
The formula to calculate the expected return of an asset given its risk is as follows:
Expected Return = Risk-Free Rate + (Beta x Market Risk Premium)
ER 1- Expected Return of investment
Rf = Risk=-free rate (typical to the yield on 10-year government bond)
Bi = Beta of the investment is a measure of a stock’s risk (volatility) reflected by measuring the fluctuation of its price changes relative to the overall market (the stock’s sensitivity to market risk). For example, if the beta is equal to 1, the expected return on a security is equal to the average market return, in this case (AAPL USA) the Beta is 1.009 the security has a .009% of the volatility of the market average.  
Each point on the graph represents a position outside or inside the market and the % of return and risk.

The Beta for Amazon US is 1.450 which represents a 45% of volatility higher than the market.


The higher the Beta = higher the risk and the return. Giving the betas for these two companies Apple’s has a lower degree of variation on its trading price compared to AMAZON.

Sources:
Data & Images taken from: Bloomberg – Terminal on 01/29/2019

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