CAPM Calculator
Accurately calculate the expected return of any investment using the Capital Asset Pricing Model (CAPM). Analyze systemic risk, stock beta, and equity risk premium.
Capital Asset Pricing Model (CAPM)
Calculate the expected return on an investment based on its systematic risk and the risk-free rate.
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Cost of Equity (Expected Return)
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Re = Rf + β(Rm - Rf)
Market Risk Premium—
Risk Premium Adjustment—
Risk Category—
Return vs. Beta Sensitivity
| Beta (β) | Expected Return | Risk Over Market |
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How to Use CAPM Calculator in 3 Easy Steps
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Step 1
Input the current risk-free rate (e.g., 10-year Treasury Yield) and the expected long-term return of the broader stock market index.
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Step 2
Specify the asset's specific Beta coefficient to accurately determine its historical price volatility relative to the broader market benchmark.
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Step 3
Click calculate to instantly view the required rate of return, risk premium breakdown, and determine if the asset aligns with your portfolio goals.
Frequently Asked Questions
The risk-free rate represents the theoretical return of an investment with zero risk of financial default, typically represented by long-term government securities like the 10-year U.S. Treasury yield.
Beta measures volatility relative to the primary market. A beta greater than 1 means the stock is more volatile than the market, requiring a higher expected return to compensate the investor for absorbing that extra risk.
This occurs when you input a Beta strictly lower than 1.0. Because the specific asset is mathematically less volatile than the general stock market, the CAPM model dictates that investors should expect a correspondingly lower rate of return.