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.

CAPM Formula

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

E(R_i) = R_f + [ E(R_m) − R_f ] × β_i

Where:

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

R_f  is the risk-free rate,

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

β_i  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(R_i) = R_f + [ E(R_m) − R_f ] × β_i = 3% + (9% − 3%) × 4 = 27%

E(R_i) = 27%

You may also be interested in our Stock Profit Calculator or Expected Return Calculator