SuperCalX

CAPM Calculator

Calculate the expected return on an asset using the Capital Asset Pricing Model (CAPM).
Calculator
Enter your values

1.0 = Market Average. Higher = More Volatile.

Analysis
Interpretation of the current calculator output

Enter values to see detailed analysis and insights.

How to Use

Step-by-step instructions
  1. 1Enter the risk-free rate (e.g., 10-year Treasury bond yield)
  2. 2Input expected market return (e.g., S&P 500 average)
  3. 3Enter the asset's Beta
  4. 4Result is the required rate of return for the risk taken

CAPM Formula

Expected Return = Risk Free Rate + Beta × (Market Return - Risk Free Rate). It relates risk to expected return.
E(Ri) = Rf + βi(Rm - Rf)

Variables:

RfRisk-free rate (e.g., Treasury yield)
βBeta (volatility relative to market)
RmExpected market return

Example

Stock Valuation

Inputs:

Risk Free Rate:3.5%
Market Return:10%
Beta:1.2 (20% more volatile)

Steps:

  1. 1.Risk Premium = 10% - 3.5% = 6.5%
  2. 2.Beta Adjustment = 1.2 × 6.5% = 7.8%
  3. 3.Expected Return = 3.5% + 7.8% = 11.3%
Result:
11.3% required return

Frequently Asked Questions

What is Beta?

Beta measures volatility. 1.0 = market average. >1.0 = more volatile (higher risk/reward). <1.0 = less volatile (defensive stocks).

Why use CAPM?

It helps investors determine if a stock is fairly valued given its risk. If estimated return > CAPM required return, it might be undervalued.

What is the Risk-Free Rate?

The theoretical return of an investment with zero risk. Usually approximated by the yield on a 10-year US Treasury bond.