Result
Expected return
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Expected return = risk-free rate + beta × (market return − risk-free rate). The second part of the formula is the market risk premium multiplied by beta: the more an asset swings relative to the market, the more premium an investor demands for taking on that extra risk.
A beta above 1 means the asset moves more than the market on average (rises faster in an upswing, falls faster in a downturn) — such assets require a higher expected return to compensate for the added risk. A beta below 1 means the asset is more stable than the market as a whole.
The CAPM result is often used as the cost of equity estimate in a WACC calculation — that's exactly what's meant when the WACC calculator notes that required return on equity is often estimated via CAPM.
CAPM is a simplified model with known limitations: it assumes all risk boils down to a single factor (the market) and ignores things like an asset's liquidity or company-specific risks. It's a standard starting estimate, not a guaranteed forecast of actual returns.