# 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%