CAPM Calculator
Find the required return for a given beta using the risk-free rate and market premium. Educational only, not trading or investment advice.
Quick answer
CAPM gives the return an asset should earn for its market risk: required return = rf + beta x (Rm - rf), where rf is the risk-free rate, beta the asset's beta and Rm - rf the market risk premium.
CAPM Calculator
Required Return
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Market Risk Premium
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Beta × Premium
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Educational only. This is not trading or investment advice.
Required Return by Beta
| Beta | Risk premium | Required return |
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Assumptions & method
- Required return = rf + β × (Rm − rf), where rf is the risk-free rate, β the asset's beta and Rm − rf the market risk premium.
- In premium mode the market risk premium is entered directly and Rm is taken as rf + premium.
- All rates are annual, in percent, and use one consistent compounding basis.
- The security market line is drawn for beta 0 to 2, extended if your beta lies outside that range.
- Not included: size, value or other factors, taxes, costs, or estimation error in beta. The result is a model estimate, not a forecast, and not trading or investment advice.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
How CAPM links risk and required return
CAPM says the return you should demand from an asset is a safe baseline plus compensation for the market risk you take. The baseline is the risk-free rate. The compensation is the asset's beta multiplied by the market risk premium, the extra return the market is expected to deliver over the risk-free rate. Plotting required return against beta gives the security market line: assets priced above the line offer more than the model requires, assets below it offer less. The model is a simplification and the inputs are estimates, so use the result as a reference point rather than a prediction.