How it works
CAPM expresses theoretical return as the risk-free rate plus beta times the market premium. This form solves for theoretical return; enter the known quantities in Assumed risk-free rate, Beta coefficient, Assumed market return.
Inputs and units
| Input | Example value | What to enter |
|---|---|---|
| Assumed risk-free rate | 4 % | Formula symbol: riskfree. Enter the percentage as a number: for 15%, enter 15. Allowed range: -99–100. |
| Beta coefficient | 1 | Formula symbol: beta. Enter a numeric value. Allowed range: -10–10. |
| Assumed market return | 10 % | Formula symbol: market. Enter the percentage as a number: for 15%, enter 15. Allowed range: -100–100. |
Worked example
Show example inputs and results
This example is generated by the same calculation engine using the starting values in the form. Your own inputs produce your own result.
- Assumed risk-free rate
- 4 %
- Beta coefficient
- 1
- Assumed market return
- 10 %
Complete example results
- Theoretical return
- 10 %
Reading the result
The result solves for theoretical return from the entered quantities. Check the result unit and the formula conditions before using it.
Questions and answers
Can I use the example values for my own calculation?
The example values illustrate the calculation. Replace every input with your own information, especially dates, rates and the selected operation.
When can I use the theoretical return result?
Rates refer to the same period. Beta, market return and risk-free rate are user assumptions; historical data and forecasts are not verified.
Why are some results rounded?
Results display up to 8 decimal places. Calculations use the unrounded values; very small values use scientific notation. JavaScript floating-point arithmetic can introduce tiny rounding differences.
Are my inputs sent to a server?
The calculator processes inputs in your browser. Its code does not send your values to a server.
Method sources: openstax.org