CAPM Calculator – Capital Asset Pricing Model

CAPM Calculator – Capital Asset Pricing Model

Free online CAPM calculator to estimate the expected return of an investment using the capital asset pricing model. This calculator is useful for investors, finance students, analysts, portfolio managers, founders, and anyone who wants a quick estimate of the return required for a stock or portfolio based on market risk. CAPM stands for capital asset pricing model. It is one of the most widely used finance formulas because it links expected return to beta, the market return, and the risk-free rate. Instead of guessing what return is reasonable, CAPM gives a structured way to estimate the return justified by the investment’s exposure to market risk.

This calculator uses four main inputs. Investment amount means the amount you want to apply the expected return to for a money-based output. Beta means the sensitivity of the stock or portfolio to movements in the market. Market return means the expected return of the market or benchmark. Risk-free rate means the return available from a near risk-free investment over the same period. Once those values are entered, the calculator shows expected CAPM return, market risk premium, beta-adjusted risk premium, and expected ending value. These outputs help you understand both the theory and the practical dollar implication of the expected return.

The formula of CAPM

Expected CAPM return = Risk-free rate + Beta x (Market return – Risk-free rate)

Market risk premium = Market return – Risk-free rate

Beta-adjusted risk premium = Beta x Market risk premium

Expected ending value = Investment amount x (1 + Expected CAPM return)

Here risk-free rate means the low-risk baseline return, market return means the expected return of the overall market or benchmark, market risk premium means the extra return investors demand above the risk-free rate for taking market risk, beta means how sensitive the investment is to market movements, beta-adjusted risk premium means the market premium scaled by the investment’s beta, and expected CAPM return means the total return justified by that level of systematic risk.

Solved Example

Example 1: Find the CAPM return if investment amount is $100,000, beta is 1.20, market return is 10%, and risk-free rate is 3%.

Solve: Market risk premium = 10% – 3% = 7.00%

Beta-adjusted risk premium = 1.20 x 7.00% = 8.40%

Expected CAPM return = 3.00% + 8.40% = 11.40%

Expected ending value = 100000 x 1.114 = $111,400

Example 2: Find the result if investment amount is $50,000, beta is 0.80, market return is 9%, and risk-free rate is 4%.

Solve: Market risk premium = 9% – 4% = 5.00%

Beta-adjusted risk premium = 0.80 x 5.00% = 4.00%

Expected CAPM return = 4.00% + 4.00% = 8.00%

Expected ending value = 50000 x 1.08 = $54,000

Example 3: Find the result if investment amount is $200,000, beta is 1.50, market return is 12%, and risk-free rate is 2.5%.

Solve: Market risk premium = 12.00% – 2.50% = 9.50%

Beta-adjusted risk premium = 1.50 x 9.50% = 14.25%

Expected CAPM return = 2.50% + 14.25% = 16.75%

Expected ending value = 200000 x 1.1675 = $233,500

Table of CAPM calculator

How to use this CAPM calculator

Enter the investment amount in the proper input field. After that, enter beta, market return, and risk-free rate using values from the same time basis. Then click the calculate button. The calculator will show expected CAPM return, market risk premium, beta-adjusted risk premium, and expected ending value in the result box.

This calculator is especially useful when estimating a cost of equity, setting expected return assumptions, comparing securities with different betas, or building valuation models. CAPM helps convert market sensitivity into an expected return requirement. A higher beta leads to a larger beta-adjusted risk premium, while a lower beta produces a more moderate expected return. That makes CAPM practical for investment analysis, portfolio review, and corporate finance work.

When using the result, remember that CAPM is a simplified model based on a chosen beta and a chosen market return assumption. Different benchmarks, time periods, and beta estimates can lead to different CAPM outputs. CAPM also focuses on systematic market risk and does not capture every source of return or risk. Even so, it remains one of the clearest and most widely used expected-return models in finance. This calculator gives a fast way to connect risk-free return, market premium, and beta into one understandable expected return estimate.