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Capital Asset Pricing Model Calculator

Work out capital asset pricing model instantly with clear inputs, formula shown and shareable results.

About Capital Asset Pricing Model Calculator

The capital asset pricing model prices only market risk: the required return is the risk-free rate plus beta times the equity risk premium. Diversifiable risk earns nothing, because a diversified investor can remove it for free.

Formula

CAPM

E(R) = r_f + β(E(R_m) - r_f)

r_f
Risk-free rate
β
Beta

Worked example

With the default values below, Capital Asset Pricing Model Calculator returns Required Return On The Asset of 14.200%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Risk-Free Rateaccepts 0–100 %
7 %
Betaaccepts -3–5
1.2
Expected Market Returnaccepts 0–100 %
13 %

Results

Required Return On The Asset
14.200%
Equity Risk Premium
6.000%
Return Demanded For Market Risk
7.200%
Excess Over The Risk-Free Rate
7.200%

Step by step

  1. 1Values used
  2. 2CAPM
  3. 3Required Return On The Asset= 14.200
  4. 4Equity Risk Premium= 6.000
  5. 5Return Demanded For Market Risk= 7.200
  6. 6Excess Over The Risk-Free Rate= 7.200

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

Why is specific risk not rewarded?

Because it can be diversified away at no cost, so no investor needs compensation for bearing it.

What are CAPM's weaknesses?

A single risk factor, unstable betas and a hard-to-observe market premium. Multi-factor models address some of this.

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