CAPM Calculator - Capital Asset Pricing Model

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Choose which variable to calculate. Set the other three inputs and the selected variable is derived from the CAPM formula.
The return on a virtually risk-free asset, typically the 10-year US Treasury yield.
%
The expected annual return of the broad market, often approximated using long-run S&P 500 historical averages (~10%).
%
Systematic risk relative to the market. Beta = 1 moves with the market; beta > 1 is more volatile; beta < 1 is less volatile; beta < 0 moves against the market.
The required rate of return for the asset. Used only when solving for beta, risk-free rate, or market return.
%
Expected returnMarket-like return
11.1%

Required return demanded by investors given the asset's systematic risk

Market risk premium5.5%
Asset risk premium6.6%
Asset risk premium6.6%
Market risk premium5.5%

CAPM required return: 11.10%

  • The market risk premium is 5.50%, the extra return investors demand for holding the market instead of the risk-free asset.
  • Your asset's risk premium is 6.60%, the additional return above the risk-free rate required for this specific level of systematic risk.
  • This asset has a moderately high beta (more volatile than the market).
  • With a risk-free rate of 4.50% and a market return of 10.00%, investors should require 11.10% from this asset.

Next stepCAPM captures only systematic risk and assumes a linear relationship between risk and return. Pair it with fundamental analysis, the Fama-French three-factor model, or a discounted cash flow valuation for a fuller picture of investment attractiveness.

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