CAPM Calculator
The CAPM model (Capital Asset Pricing Model) is one of the foundational models in finance designed to specify the appropriate required rate of return of a financial asset or investment.
formula as
Risk premium = beta * (market risk premium)
Market risk premium=Rm-Rf
If you want to calculate the CAPM for your asset or investment, you need to use the following CAPM formula,
R = Rf + risk premium
Risk premium = beta* (Rm-Rf)
let us considers,
Rstands for the expected rate of return of an asset or investment
Rfis the risk-free interest rate, typically taken as the yield on a long-term government bond in the country where the project is based,
Rmis the broad market return, and
Betais the parameter of the market risk.
Example For
R = Rf + beta* (Rm – Rf)
Rf = 3.4% for the 3-month US Treasury Bill.
beta = 0.46,
CAPM formula,
R = Rf + beta* (Rm – Rf)
R=3.4+0.46*(10-34)
The answer is CAPM =3.86