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Capital Asset Pricing Model Converter

This calculator estimates the expected return of an investment using the Capital Asset Pricing Model (CAPM), helping investors understand the relationship between risk and expected return. It’s a vital tool in portfolio management and financial analysis.

CAPM Expected Return Calculator

Input Fields
Rf
%
Enter the risk-free rate (e.g., government bond yield)
β
Enter the beta of the asset
Rm
%
Enter the expected return of the market

CAPM Formula for Expected Return

Formula
$$E(R_i) = R_f + \beta_i \times (E(R_m) – R_f)$$

Where:

  • $$E(R_i)$$ = expected return of the investment
  • $$R_f$$ = risk-free rate
  • $$\beta_i$$ = beta of the investment (volatility compared to the market)
  • $$E(R_m)$$ = expected market return


The Capital Asset Pricing Model (CAPM) calculates the expected return of an asset based on its risk in comparison to the overall market. This model helps investors make informed decisions by estimating whether an asset offers a return worth its risk. It assumes a linear relationship between expected return and market risk, quantified by beta. It’s widely used in equity valuation, portfolio optimization, and cost of equity calculations.

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One thought on “Capital Asset Pricing Model Converter”

  1. calcuing says:
    11.02.2022 at 08:17

    Calculators provide specific personal solutions that your clients may be seeking. No matter the industry, if there is something your clients can calculate, give them a chance.

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