This formula can be calculated in Microsoft Excel as shown below.
- CAPM is a component of the efficient market hypothesis and modern portfolio theory.
- To find the expected return of an asset using CAPM in Excel requires a modified equation using Excel syntax, such as =$C$3+(C9*($C$4-$C$3))
How do I calculate CAPM?
To calculate the expected return on assets, you must utilize the CAPM formula: Expected return = risk-free rate + volatility/beta * (market return - risk-free rate).
How do you calculate cost of equity using CAPM in Excel?
After gathering the necessary information, enter the risk-free rate, beta and market rate of return into three adjacent cells in Excel, for example, A1 through A3. In cell A4, enter the formula = A1+A2(A3-A1) to render the cost of equity using the CAPM method.