CAPM Beta Calculator

To calculate CAPM Beta, divide the difference between the expected return of the investment ( $ER_i$ ) and the risk-free rate ( $r_f$ ) by the difference between the expected market return ( $ER_m$ ) and the risk-free rate.

The CAPM Beta Calculator is a helpful tool for assessing the systematic risk of an investment compared to the overall market. Beta is a key component of the Capital Asset Pricing Model (CAPM), widely used in finance to evaluate the risk and return relationship.

By calculating beta, investors can understand how sensitive an asset’s returns are to market movements, aiding in portfolio diversification and risk management. This calculator simplifies complex equations, offering quick and accurate results for financial analysis.

Formula

Contents

1 Formula
2 Solved Calculations
3 What is the CAPM Beta Calculator?

$B = \frac{ER_i – r_f}{ER_m – r_f}$

Variable	Description
B	Beta (systematic risk indicator)
$ER_i$	Expected return of the investment (%)
$r_f$	Risk-free rate (%)
$ER_m$	Expected market return (%)

Solved Calculations

Example 1:
Calculate the beta for an investment with an expected return of 12%, a risk-free rate of 2%, and an expected market return of 8%.

Step	Calculation	Result
Expected Return ( $ER_i$ )	12%
Risk-Free Rate ( $r_f$ )	2%
Market Return ( $ER_m$ )	8%
Apply Formula	$\frac{12 – 2}{8 – 2}$	1.67

Example 2:
What is the beta for an investment with an expected return of 10%, a risk-free rate of 3%, and a market return of 9%?

Step	Calculation	Result
Expected Return ( $ER_i$ )	10%
Risk-Free Rate ( $r_f$ )	3%
Market Return ( $ER_m$ )	9%
Apply Formula	$\frac{10 – 3}{9 – 3}$	1.17

What is the CAPM Beta Calculator?

The CAPM Beta Calculator is a valuable tool. One can utilize it for estimating a stock’s beta, a measure of its volatility relative to the overall market. Beta is an integral component of the Capital Asset Pricing Model (CAPM), which is used to calculate the expected return on an investment by considering the risk-free rate, market return, and beta value.

This calculator is particularly useful for investors and analysts assessing portfolio risk and cost of equity.

This tool simplifies queries like “How to calculate beta on CAPM?” or “What does a beta of 1.3 mean?” By inputting the required variables—such as risk-free rate, market return, and stock return—it quickly calculates beta. It also supports advanced applications like portfolio beta calculations and analyzing beta in CAPM models for private companies or options.

Final Words:

In conclusion, the CAPM Beta Calculator is an indispensable tool for financial professionals and investors. It simplifies beta and expected return calculations, aiding in effective portfolio management and investment decision-making.