Capital Asset Pricing Model(CAPM) Calculator
This small business tool is used to derive the cost of equity using the risk-free rate of return using the CAPM model.
How to calculate CAPM :
It is the relationship between the expected return and risk of investing in a security.The below formula is used to determines the expected return of a particular asset or investment.
CAPM Formula :
E(Ri) = Rf + [ E(Rm) - Rf ] × βi
E(Ri) - the expected return on the capital asset
Rf - the risk-free rate
E(Rm) - the expected return of the market
βi - the beta of the security i
Risk Free Rate of Return Formula :
Risk-free rate of return is an investment with zero risks.The risk-free rate is generally used is the United States 10 year government bond.
Risk Free Rate of Return =