Expected returns are influenced by systematic risk that is measured by an asset’s or a portfolio’s beta. The higher the level of systematic risk, the greater is the expected return. An asset’s risk...

Expected returns are influenced by systematic risk that is measured by an asset’s or a portfolio’s beta. The higher the level of systematic risk, the greater is the expected return.

An asset’s risk premium is the reward for carrying systematic risk. It is equal to the product of market risk premium and the asset’s beta.