# Capital Asset Pricing Model (CAPM) Calculator

Please enter your values in the Capital Asset Pricing Model (CAPM) Calculator. Example is included below.

Risk free rate (%): Beta of security: Expected return of the market (%):

## How to use the Capital Asset Pricing Model (CAPM) Calculator

Let’s now review a simple example to demonstrate how to use the CAPM calculator.

To start, let’s suppose that you’d like to derive the Expected Return of a security, given the following information:

• The Risk Free Rate is 5%
• The Beta of the security is 2
• The Expected Return of the Market is 8%

Based on the above information, enter the values in the CAPM Calculator to get the Expected Return of the security:

Once you entered the values in the calculator, click on the “Calculate Expected Return of Security” button, and you’ll get the expected return of 11%:

## How to Manually Derive the Expected Return of a Security

You can also derive the Expected Return of a security using the formula below:

```E(Ri) = Rf + βi[E(Rm) – Rf]
```

Where:

• E(Ri) = expected return of security i
• Rf = risk free rate
• βi = beta of security i
• E(Rm) = expected return of the market

To demonstrate how to apply the formula in practice, let’s review an example, where the goal is to derive the Expected Return of a security, given the following information:

• The Risk Free Rate is 5%
• The Beta of the security is 2
• The Expected Return of the Market is 8%

In that case, the Expected Return of the security is 11%:

```E(Ri) = Rf + βi[E(Rm) – Rf] = 5% + 2[8% - 5%] = 11%
```