[Verse 1] Meet the CAPM equation, elegant and clean Expected return equals risk-free rate plus beta times the scene Market risk premium multiplied by beta's coefficient Tells us what an asset's worth when markets are efficient [Chorus] R equals R-f plus beta times market minus R-f Risk-free rate plus systematic risk, nothing more or less Beta measures volatility compared to market's swing One means average, less means stable, more means wild swings [Verse 2] Beta zero-point-five moves half the market's pace Conservative and steady, in a safer financial space Beta equals one point five amplifies each market turn Higher risk demands higher rewards for what you'll earn [Chorus] R equals R-f plus beta times market minus R-f Risk-free rate plus systematic risk, nothing more or less Beta measures volatility compared to market's swing One means average, less means stable, more means wild swings [Bridge] Treasury bills anchor our equation's starting point Risk-free return where no default can disappoint Market premium compensates for bearing systematic risk Beta quantifies how much your stock will twist and whisk [Verse 3] Defensive stocks have betas sitting below one Utilities and groceries when market storms have begun Aggressive stocks exceed one, technology and growth Amplify market movements, for better and for both [Chorus] R equals R-f plus beta times market minus R-f Risk-free rate plus systematic risk, nothing more or less Beta measures volatility compared to market's swing One means average, less means stable, more means wild swings [Outro] CAPM guides our pricing, beta shows the way Systematic risk and compensation, every trading day
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