UNCERTAINTY, REGARDING future interest rates is generally presumed to be an inherent source of risk in default free bonds. In addition, a number of writers consider the beta coefficient of the market model as the relevant measure of risk for a default free security. Boquist, Racette, and Schlarbaum [1975] suggest a link between beta and duration. McCallum [1975] develops the term structure of interest rates according to holding period yields. This follows the original term structure contributions by Roll [1971] and Bogue and Roll [1974]. Nevertheless, the appropriateness of the beta coefficient for these purposes is not clear. In addition to obvious practical problems of beta measurement for fixed income securities, the development of the theoretical market equilibrium single period capital asset pricing model' does not allow for shifts in future single period interest rates.2 This paper examines interest rate risk as systematic risk when the asset pricing model is used in a multi-period context such as by Bogue and Roll [1974], and by Morris [1976]. Specifically, the capital asset pricing model is extended to deal with a two period bond. The applicability of the model to longer term instruments is also considered. The asset pricing model is formulated in terms of revision errors, somewhat analogous to the interest rate revision errors of Meiselman [1962], but applicable to any risky asset, not just bonds.