CAPM Calculator

This calculator works out the expected return on a share or other investment using the Capital Asset Pricing Model (CAPM), a method for linking an asset's risk to the return an investor should reasonably expect from it. It gives you two ways to run the numbers. The standard calculation asks for the risk free rate (Rf), the stock's beta (B), which measures how volatile it is compared with the wider market, and the expected return of the market (ERM), then works out the expected return (ER) by adding the risk free rate to beta multiplied by the market's risk premium over that rate. The second method uses the market risk premium (Rm - Rf) directly instead of the market return, for when you already have that figure, and produces its own expected return. Enter your figures as percentages for the rates and a decimal for beta, and each result updates instantly. Use the tool to check a share's expected return against its risk, compare investments with different beta values, or support a cost of equity calculation for valuation work. A beta above 1 signals higher volatility and a higher expected return, while a beta below 1 suggests the opposite. These figures are only as reliable as the assumptions you enter, so treat the result as an indicative estimate rather than investment advice.

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CAPM Standard Calculation

CAPM based on Market Risk Premium