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%

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%