How does the risk premium reflect Beta? (JQ)

Beta tells you what your company would have to pay to attract investors. You would have to pay more if you are a risky company and less if you are less risky. Beta tells you how senisitive your company is to the market. When Beta=1, then your company moves with the market rate. When Beta is less than 1, the rate of your company stock is less sensitive to the changes in the market rate, making the investment in your company less risky. When Beta is greater than 1, the rate of your company stock is more sensitive to changes in the market rate, which makes your company a riskier investment depending on how high the Beta.

Risk premium tells you exactly the same things. From calculating the risk premium you should be able to estimate the beta. Risk premium also tell you how much more your company needs to pay to attract money to your company, which are also known as investments. The risk premium reflects the risk of your cash flows; therefore, the riskier your cash flows, the higher the risk premium. A higher risk premium means a riskier investment just as a higher Beta above 1 means a riskier investment. If you see you have a high risk premium (risky investment) you can assume you have a Beta greater than 1.