CAPM Expected Return Calculator
Free CAPM calculator estimates expected return as risk-free rate plus beta times market risk premium. Enter RF rate, beta, and market return to get cost of equity for WACC or DCF instantly.
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How CAPM Works
Capital Asset Pricing Model estimates required return on equity given systematic risk. Enter risk free rate, beta, and expected market return. Equity risk premium equals market return minus risk free rate. Expected return equals risk free rate plus beta times equity risk premium. The calculator decomposes return into risk free component and risk premium component for CFA Level I style homework. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Use CAPM output as cost of equity in WACC, as discount rate in equity DCF, and as benchmark in Jensen Alpha analysis. Historical US equity premium near 5 to 6 percent is common though forward looking premia may differ. Document your premium assumption in case write ups. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Use long-term government bond yield for Rf matched to cash flow currency. Historical US equity premium near 5 to 6 percent is common though forward estimates may differ. Document your premium assumption. Pair with WACC Calculator on portfolios.tools for full weighted average cost of capital.
Use CAPM Expected Return Calculator whenever inputs change: after market moves, new contributions, or revised personal assumptions. Bookmark the page for quick reruns without installing software.
Step by step
- Open CAPM Expected Return Calculator and enter your current inputs.
- Review calculated outputs and summary tables.
- Adjust assumptions and compare scenarios side by side.
Worked example
Enter the sample inputs described in How it works to reproduce the scenario step by step with CAPM Expected Return Calculator. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Adjust one input at a time to see sensitivity. CAPM Expected Return Calculator updates instantly so you can stress test optimistic and conservative assumptions before acting.
When to use this calculator
Reach for CAPM Expected Return Calculator when expected return equals risk free rate plus beta times market risk premium.. It suits quick what if analysis before trades, allocation changes, or plan updates. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Pair with related tools when the decision spans taxes, liquidity, or multi year projections beyond what one formula captures.
Common mistakes
Copying outputs without checking input units or stale market prices is a frequent error with CAPM Expected Return Calculator. Confirm tickers, percentages, and dates before acting.
Running a single baseline scenario ignores tail risks. Stress test with conservative inputs and compare against related tools listed below when the decision is material.
The Formula
ERP = Rm − Rf
E(R) = Rf + β × ERP
Use long term government bond yield for Rf matched to cash flow currency. Market return can be historical index CAGR or forward ERP plus Rf. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Limitations and assumptions
Use long term government bond yield for Rf matched to cash flow currency. Market return can be historical index CAGR or forward ERP plus Rf. CAPM Expected Return Calculator does not replace personalized advice. Fees, slippage, account specific rules, and behavioral constraints may change real world outcomes. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Key terms
- What risk free rate should I use
- Use government bond yield matching investment horizon and currency, typically 10 year Treasury for US equity valuation.
- What is a typical equity risk premium
- Historical US ERP near 5 to 6 percent.
- Model assumption
- Use long term government bond yield for Rf matched to cash flow currency.
Compare alternatives
Use WACC Calculator and Hamada Beta on portfolios. Use those calculators when this tool alone does not capture the full decision. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Internal links on portfolios.tools help you chain calculators: run CAPM Expected Return Calculator first, then validate edge cases with a specialized tool from the related section below.
FAQ
What risk free rate should I use?
Use government bond yield matching investment horizon and currency, typically 10 year Treasury for US equity valuation. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
What is a typical equity risk premium?
Historical US ERP near 5 to 6 percent. Forward looking estimates from analysts may range 4 to 7 percent depending on methodology. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Where do I get beta?
Use regression beta from financial data providers or Hamada Beta Calculator to adjust for target leverage. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
Can CAPM expected return be negative?
With negative beta or very low market return assumptions, yes though rare for standard equity. Verify inputs if result seems implausible. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
How does CAPM relate to WACC?
CAPM expected return is the cost of equity input in WACC alongside after tax cost of debt weighted by capital structure. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.
How do I use CAPM Expected Return Calculator?
Enter your inputs in the form above to calculate cost of equity using risk-free rate, beta, and market risk premium with CAPM Expected Return Calculator. The free calculator runs entirely in your browser on portfolios.tools. Optional localStorage may remember inputs on your device when enabled in browser settings.
Where is my data stored when I use CAPM Expected Return Calculator?
Nowhere on our servers. Calculations execute locally in your browser. Optional localStorage saves form fields on your device only and never transmits portfolio numbers over the network.
Should I rely on CAPM Expected Return Calculator for tax or legal decisions?
No. CAPM Expected Return Calculator provides educational math only. Tax law, account rules, and personal circumstances vary. Consult a qualified tax or legal professional before transactions with material consequences.
Related Tools
Use WACC Calculator and Hamada Beta on portfolios.tools. Pair with Sharpe Sortino Ratio for realized return vs CAPM benchmark comparison. Corporate finance students use this calculator for homework validation, case study preparation, and interview drills. Compare outputs against textbook examples before submitting assignments. Adjust one input at a time to understand sensitivity. All math runs locally in your browser with no server transmission. Pair with related tools on portfolios.tools when decisions span multiple variables.