 In this section, I will explain the concept of beta and risk premiums when we are dealing with the individual security. So we were talking about capital asset pricing model and when we are dealing with the capital asset pricing model, we do take into account the risk premium and the beta values. So it is important to understand what is meant by the beta in CAPM. So basically what we are, it is simple to accept this reality that if suppose we are having two securities and the risk of security A is larger than the risk of security B. It means that by investing money in security B, the return you are getting, the risk is less as compared to risk in the security A. So if you are taking more risk by investing in security A, you will expect a higher return from security A. So this is a basic concept. So the higher risk involved with security A, you expect that it will give me a bigger return as compared to other securities whose risk is less as compared to the return you expected return that is lower as compared to this one. So that is the basic foundation. Now if we look at the overall decision that we have to invest in this situation in portfolio concierge, then we discussed that we have to take this CML, capital market line, point of tangency, with an efficient frontier and what will happen there on that particular point, your expected return is getting maximum at a given level of risk. So that is why we call that particular allocation point as the optimal point. Now if we look at it in terms of the beta, now beta is equal to the ratio of sigma jm. I have written in the formula that sigma jm is divided by the sigma square of m. So basically what you are trying to do is you have to take out the covariance of a certain individual security return and the market return with the covariance. That means what is their degree of association. So with a certain individual security return and market return, you will account for covariance and what variation is going on in the market return overall. So if you account for a certain individual security return and market return with covariance divided by the volatility in the market. So if you calculate the ratio, you will get the value of the total risk involved in which you are going to take by investing in a certain specific individual security. We are calling it j in this formula, hypothetically. So beta will give you the mayor of risk. So if we try to understand it in the formula wise, this is beta from security j. We have assumed that it is j. So beta from j, that means the risk from j will be equal to the covariance between the return on the security j and the return on the market portfolio. And divided by the volatility of the market, you will get the mayor of risk of that particular security. And we represent that from beta. So suppose you have a security A or any name you have assumed, B or C or any company name that can be given by simply the ratio of these two values. And this will give you the the mayor of the securities risk. So security risk we have to account for and we have to account for the risk premium. And these two things together tell you how the equilibrium can be established. So in equilibrium, the expected return from an individual security j minus the risk-free return. We will call it excess return on security j. So this can be termed as excess return on security j is equal to the risk of security j multiplied by excess market return. What should we do here? Look carefully. Here we are taking j or we are taking the return of the market portfolio. Right? So we have made a benchmark. The portfolio of the market, we will use that particular reference. The expected return minus the risk-free return. We will multiply that by the value of our risk and we will know what our excess return on security j will be. And this is how you can find out the value of equilibrium. If we are applying the concept of capital asset pricing model or CAPM, then we can calculate the equilibrium value of excess return on a certain security or asset of, which we call j here. We can calculate the equilibrium value of excess return on any of your security j.