However,the risk premium should reflect only nondiversifiable risk. Using the Capital Asset Pricing Model(CAPM),the risk premium is the "asset beta"for the project multiplied by the risk premium on the stock market as a whole. The "asset beta"measures the sensitivity of the project's return to movements in the market. However, the risk premium should reflect only nondiversifiable risk. Using the Capital Asset Pricing Model (CAPM), the risk premium is the “asset beta” for the project multiplied by the risk premium on the stock market as a whole. The “asset beta” measures the sensitivity of the project's return to movements in the market