Fidamen

CAPM Calculator (Capital Asset Pricing Model)

This calculator estimates an asset's expected return (often used as cost of equity) using the Capital Asset Pricing Model (CAPM). Enter a risk-free rate, the expected market return, and the asset beta to compute the equity market premium and the CAPM result.

CAPM is a single-factor, widely used model that links expected return to market risk exposure. Use the tool for quick scenario analysis, sensitivity checks, and documentation of assumptions for reporting or valuation work.

Updated Nov 17, 2025QA PASS — golden 25 / edge 120Run golden-edge-2026-01-23

Governance

Record e2322330e4e7 • Reviewed by Fidamen Standards Committee

Inputs

Results

Updates as you type

Equity Market Premium

550.00%

Expected Return / Cost of Equity (CAPM)

800.00%

OutputValueUnit
Equity Market Premium550.00%%
Expected Return / Cost of Equity (CAPM)800.00%%
Primary result550.00%

Visualization

Methodology

CAPM expresses expected return as: Expected Return = Risk-free rate + Beta × (Market return − Risk-free rate). The model isolates systematic risk using beta and assumes investors are compensated only for market risk.

Key assumptions and limitations are noted: CAPM assumes a single-period horizon, frictionless markets, and that beta captures all priced risk. For professional or regulatory work, validate inputs and document sources for the risk-free rate and beta. Where required, follow institutional policies for model validation and change control.

For governance and accuracy practices, align your calibration, testing, and documentation with relevant standards: follow NIST guidance on risk and controls for model systems, apply ISO guidance on risk management (ISO 31000) for assumption tracking, and use IEEE best practices for numerical software quality. Observe workplace safety and operational compliance practices per OSHA where they apply to operational environments.

Key takeaways

Use CAPM for a straightforward, transparent estimate of expected return that ties compensation to market (systematic) risk.

Document inputs, run sensitivity tests, and where decisions are material, complement CAPM with multi-factor models or additional valuation approaches.

Worked examples

Example: rf = 2.5%, market_return = 8.0%, beta = 1.2. Equity Market Premium = 8.0 − 2.5 = 5.5%. Expected Return = 2.5 + 1.2 × 5.5 = 9.1%.

Sensitivity: If beta = 0.8 with the same rates, Expected Return = 2.5 + 0.8 × 5.5 = 6.9%.

F.A.Q.

Which risk-free rate should I use?

Choose a risk-free rate consistent with your valuation horizon and currency. Common proxies include long-dated government bond yields for the same currency and duration as the cash flows being valued. Document the source and date of the yield.

Where does beta come from and how should I pick it?

Beta can be estimated from historical regression of asset returns versus a market index or sourced from published estimates. For private firms, unlever and relever comparable-company betas using a consistent capital structure. Record the estimation window, frequency, and any adjustments.

What are CAPM's main limitations?

CAPM captures only market (systematic) risk via beta and omits other priced factors. It relies on simplified market assumptions. For material valuations, perform robustness checks and consider multi-factor models.

How accurate are results from this calculator?

This tool implements the CAPM formula accurately for the provided inputs. Accuracy of the economic result depends entirely on input quality and model suitability. Follow institutional model risk and validation practices and cite sources for all inputs.

Is this suitable for regulatory reporting or audits?

The calculator is for analysis and documentation support. For regulatory reporting or audits, follow your organization's validation, internal control, and documentation standards; ensure reproducibility and version-controlled inputs per relevant frameworks.

Sources & citations

Further resources

Versioning & Change Control

Audit record (versions, QA runs, reviewer sign-off, and evidence).

Record ID: e2322330e4e7

What changed (latest)

v1.0.0 • 2025-11-17 • MINOR

Initial publication and governance baseline.

Why: Published with reviewed formulas, unit definitions, and UX controls.

Public QA status

PASS — golden 25 + edge 120

Last run: 2026-01-23 • Run: golden-edge-2026-01-23

Engine

v1.0.0

Data

Baseline (no external datasets)

Content

v1.0.0

UI

v1.0.0

Governance

Last updated: Nov 17, 2025

Reviewed by: Fidamen Standards Committee (Review board)

Credentials: Internal QA

Risk level: low

Reviewer profile (entity)

Fidamen Standards Committee

Review board

Internal QA

Entity ID: https://fidamen.com/reviewers/fidamen-standards-committee#person

Semantic versioning

  • MAJOR: Calculation outputs can change for the same inputs (formula, rounding policy, assumptions).
  • MINOR: New features or fields that do not change existing outputs for the same inputs.
  • PATCH: Bug fixes, copy edits, or accessibility changes that do not change intended outputs except for previously incorrect cases.

Review protocol

  • Verify formulas and unit definitions against primary standards or datasets.
  • Run golden-case regression suite and edge-case suite.
  • Record reviewer sign-off with credentials and scope.
  • Document assumptions, limitations, and jurisdiction applicability.

Assumptions & limitations

  • Uses exact unit definitions from the Fidamen conversion library.
  • Internal calculations use double precision; display rounding follows the unit's configured decimal places.
  • Not a substitute for calibrated instruments in regulated contexts.
  • Jurisdiction-specific rules may require official guidance.

Change log

v1.0.0 • 2025-11-17 • MINOR

Initial publication and governance baseline.

Why: Published with reviewed formulas, unit definitions, and UX controls.

Areas: engine, content, ui • Reviewer: Fidamen Standards Committee • Entry ID: 98c034af38d5