Find the required return on a stock from beta, the risk-free rate and the market return.
Please do not make financial decisions based on these results.
What is the CAPM Calculator – Capital Asset Pricing Model?
Find the required return on a stock from beta, the risk-free rate and the market return. To use the CAPM Calculator – Capital Asset Pricing Model, enter risk-free rate, beta, expected market return; it returns expected return, market risk premium, risk premium for this stock, and shows them instantly as you type.
Valuing a stock step by step
Begin with the P/E ratio and PEG ratio to see what the market pays for earnings and growth. Then check quality with ROE and ROIC, and compare ROIC with the WACC.
For a second opinion, estimate intrinsic value with the Dividend Discount Model Calculator or the Graham Number Calculator, then compute the margin of safety against today’s price.
- Returns. EPS, EPS growth, dividend yield and payout ratio measure what shareholders earn.
- Risk. Beta, unlevered beta and portfolio beta measure sensitivity to the market.
- Position tools. Stock average, stock split and market cap calculators keep your records straight.
How to use the CAPM Calculator – Capital Asset Pricing Model
- Enter your numbers. The inputs are Risk-free rate (%), Beta, Expected market return (%). Take price and share figures from the latest filing or quote. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Expected return, and the cards below show Market risk premium, Risk premium for this stock. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the CAPM Calculator – Capital Asset Pricing Model using the default values shown in the calculator above:
Inputs
| Risk-free rate (%) | 4.2 |
|---|---|
| Beta | 1.1 |
| Expected market return (%) | 9.5 |
Results
| Expected return | 10.03% |
|---|---|
| Market risk premium | 5.3% |
| Risk premium for this stock | 5.83% |
With these inputs the calculator returns Expected return: 10.03%. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Risk-free rate (%) from 4.2 to 5.04 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Expected return | 10.03% | 9.95% | -0.8% |
| Market risk premium | 5.3% | 4.46% | -15.8% |
| Risk premium for this stock | 5.83% | 4.91% | -15.8% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the CAPM Calculator – Capital Asset Pricing Model reports Expected return, market risk premium and risk premium for this stock. Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
What is the equity risk premium?
It is the extra return investors require over the risk-free rate for holding stocks, Rm − Rf.
Where do I find the inputs?
Company filings (10-K and 10-Q), investor relations pages and your broker show earnings, equity, debt and share counts.
Which valuation ratio should I trust?
No single ratio is enough. Compare several multiples with the company’s own history and its industry peers.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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