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CAPM Calculator

Computes the expected return of an asset with the capital asset pricing model (CAPM) from the risk-free rate, the asset's beta and the expected market return, plus the equity risk premium and the beta-scaled premium.

When to use

You need a required or expected return for a stock or portfolio given its beta, for example as the cost of equity in a DCF or WACC calculation.

Do not use when: The asset's beta is unknown or unstable, or you need a multi-factor return (Fama-French) rather than the single-factor CAPM. Informational only; not financial advice.

Formula

expected_return_percent = risk_free_rate_percent + beta × (market_return_percent − risk_free_rate_percent)

Single-factor CAPM (Sharpe 1964, Lintner 1965): only systematic (market) risk is rewarded; beta is usually estimated from 2–5 years of historical returns and the premium from long-run market history. Informational mathematics only; not financial advice.

Inputs

Parameter	Type	Unit	Required	Description
`risk_free_rate_percent`	number	% per year	yes	Yield on a risk-free instrument such as a government bond, in percent. Range: ≥ -20, ≤ 100
`beta`	number		yes	Sensitivity of the asset's returns to the market (1 = moves with the market, 0 = uncorrelated). Range: ≥ -10, ≤ 10
`market_return_percent`	number	% per year	yes	Expected annual return of the market portfolio in percent. Range: ≥ -100, ≤ 200

Outputs

Output	Type	Unit	Description
`expected_return_percent`	number	%	risk_free_rate + beta × (market_return − risk_free_rate).
`equity_risk_premium_percent`	number	%	market_return − risk_free_rate.
`beta_premium_percent`	number	%	beta × equity risk premium: the return earned above the risk-free rate.

Example

rf 3 %, beta 1.2, market 8 %: {"risk_free_rate_percent":3,"beta":1.2,"market_return_percent":8} → {"expected_return_percent":9,"equity_risk_premium_percent":5,"beta_premium_percent":6}

rf 4 %, beta 0.8, market 10 %: {"risk_free_rate_percent":4,"beta":0.8,"market_return_percent":10} → {"expected_return_percent":8.8,"equity_risk_premium_percent":6,"beta_premium_percent":4.8}

GET https://tttkmbb.com/api/v1/calculate/capm?risk_free_rate_percent=3&beta=1.2&market_return_percent=8

Machine access

API: GET https://tttkmbb.com/api/v1/calculate/capm (query parameters) or POST with a JSON body {"inputs": {...}}
Schema: https://tttkmbb.com/api/v1/calculators/capm · Markdown: https://tttkmbb.com/investing/capm.md · JSON definition: https://tttkmbb.com/investing/capm.json
MCP: server https://tttkmbb.com/mcp, tool run_calculator with calculator_id="capm"
OpenAPI operationId: calculate_capm_expected_return
Freshness: static. Authentication: none. Rate limit: fair use (see rate limits).

Sources

Wikipedia – Capital asset pricing model (reference)
Wikipedia – Modern portfolio theory (reference)

FAQ

What does a beta above 1 mean?

The asset has moved more than the market: a beta of 1.2 implies returns about 20 % more volatile than the market, so CAPM demands a proportionally higher premium.

Is the CAPM return a forecast?

No. It is the return that compensates for systematic risk under the model's assumptions; realised returns differ, and the model ignores size, value and momentum effects.

Related calculators

WACC Calculator — Use the CAPM return as the cost of equity in the weighted average cost of capital.
Sharpe Ratio Calculator — Risk-adjusted return of a realised portfolio.
DCF Valuation Calculator — Discount cash flows at the required return.