What this calculator does
CAPM (cost of equity) works out the return shareholders should require, given the market risk a stock carries. Enter your own figures above and the answer updates as you type: nothing is fixed in the code, so the result reflects exactly the numbers you supply.
The formula this calculator evaluates is printed under the tool and explained below, so you can check the working by hand or reuse it in a spreadsheet.
The formula
FormulaR = Rf + β·(Rm − Rf)
The inputs explained
| Field | What to enter |
|---|---|
| Risk-free rate (%) | A number, measured in %. Starts at 4. |
| Beta | A number. Starts at 1.2. |
| Expected market return (%) | A number, measured in %. Starts at 9. |
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How the answer changes with risk-free rate
Every other input is held at the calculator’s starting values while risk-free rate varies. Select any row to load that scenario into the calculator.