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The Capital Asset Pricing Model is used to price out risky securities [typically]. This calculation describes and determines the risk associated with an asset and its expected rate of return. This is used frequently to help determine stock prices and what you should pay based on the risk of that stock.
The way that this calculation works is to determine what the investor should receive based on the risk they are taking as well as the time value of the money being invested. The formula is fairly simple with a calculation looks like this.
Risk Free Return + [Risk Measure * (Expected Market Return - Risk Free Return)]
When looking at measures of risk, there's a couple of things that you can use. First, is what is used in this particular model, Standard Deviation. The alternative is to use beta. The beta is generally fairly easy to find on a Yahoo Quote page, standard deviations may need to be calculated by you.