📐 CAPM Calculator – Capital Asset Pricing Model
Calculate the expected return of an asset using the Capital Asset Pricing Model (CAPM), based on its beta and the market’s expected return.
What is CAPM?
The Capital Asset Pricing Model (CAPM) estimates the return an investor should expect from an asset given its risk relative to the overall market. It’s widely used to estimate the cost of equity for a company or the required return for an investment.
The formula
Expected Return = Risk-Free Rate + Beta × (Expected Market Return – Risk-Free Rate). The term (Market Return – Risk-Free Rate) is called the equity (or market) risk premium, and beta scales how sensitive the asset is to that premium.
This tool is for general educational purposes. CAPM relies on simplifying assumptions about markets and risk, so treat the result as a theoretical estimate rather than a guaranteed return.