CAPM Calculator
Estimate a required return from the risk-free rate, market return, and beta.
Result
Review or adjust your inputs, then calculate to see your results and interpretation.
Understand this calculation
The market premium is market return minus the risk-free rate. Beta scales it into systematic risk compensation; the result is a model-required return, not a guaranteed outcome.
See calculation method and assumptions
Formula
CAPM
Variables, rates and periods
- Ri
- CAPM required return, not a guaranteed return.
- Rf
- Risk-free rate, using the same period as market return.
- Rm
- Market portfolio return.
- β
- Sensitivity to market returns, not total risk.
Interpret a negative premium
- A market-return assumption below the risk-free rate gives a negative premium.
- The formula remains defined, but the horizon and forward-looking assumptions merit review.
Estimate a required return from the risk-free rate, market return, and beta.
Worked example
- Match the currency and horizon of risk-free and market rates.
- Market premium is 9% − 3% = 6%.
- Required return is 3% + 1.2 × 6% = 10.2%.
Frequently asked questions
Can beta be negative?
Yes. Negative beta indicates inverse co-movement with the chosen market; a positive premium can then imply a required return below the risk-free rate.
What are the limitations?
CAPM assumes diversified investors, common expectations, and idealized trading conditions. Beta, risk-free asset, and market-proxy choices affect the result, and the model does not capture every risk.
Related calculators
WACC Calculator
Estimate WACC from market-value financing weights, equity cost, and after-tax debt cost.
Portfolio Risk and Return Calculator
Estimate a two-asset portfolio's expected return and volatility from weights and correlation.
Sharpe Ratio Calculator
Measure excess return per unit of total volatility with the Sharpe ratio.