CAPM Calculator

In finance, the Capital Asset Pricing Model is used to describe the relationship between the risk of a security and its expected return. You can use this Capital Asset Pricing Model (CAPM) Calculator to calculate the expected return of a security based on the risk-free rate, the expected market return and the stock's beta.

Complete the form below and click "Calculate" to see the results.

Capital Asset Pricing Model Calculator

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CAPM Formula

The calculator uses the following formula to calculate the expected return of a security (or a portfolio):

E(Ri) = Rf + [ E(Rm) − Rf ] × βi

Where:

E(Ri)  is the expected return on the capital asset,

Rf  is the risk-free rate,

E(Rm)  is the expected return of the market,

βi  is the beta of the security i

 

Example: Suppose that the risk-free rate is 3%, the expected market return is 9% and the beta (risk measure) is 4. In this example, the expected return would be calculated as follows:

E(Ri) = Rf + [ E(Rm) − Rf ] × βi = 3% + (9% − 3%) × 4 = 27%

E(Ri) = 27%

 

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