📊 CAPM Calculator
Calculate expected return using the Capital Asset Pricing Model
How to Use This Calculator
1
Enter Inputs
Provide risk-free rate, market return, and the stock's beta.
2
Calculate
Click the button to compute the expected return using CAPM.
3
Interpret
Use the expected return to evaluate investment attractiveness.
Formula
E[R] = Rf + β × (Rm − Rf)
Example: If Rf = 2%, Rm = 8%, β = 1.2 → E[R] = 2 + 1.2 × (8 − 2) = 9.2%
About CAPM Calculator
CAPM estimates a security's expected return based on its sensitivity to market risk (beta), the risk-free rate, and the market's expected return.
When to Use
- Cost of equity estimation
- Project hurdle rate selection
- Portfolio expected return analysis
Tips
- Use consistent annualized percentages
- Choose a relevant market proxy (e.g., broad index)
- Beta should match the same horizon as returns
Frequently Asked Questions
Is CAPM realistic?
It’s a simplification, but widely used for its clarity and consistency in estimating cost of equity.
What units should I use?
Enter rates in percentages (e.g., 8 for 8%). The output is also in percent.
Where do I get beta?
Estimate from historical returns or use published estimates from data providers.