How do you 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).
What is beta CAPM formula?
The beta (denoted as Ba in the CAPM formula) is a measure of a stock's risk (volatility of returns) reflected by measuring the fluctuation of its price changes relative to the overall market. In other words, it is the stock's sensitivity to market risk.
How is return calculated in CAPM?
To calculate an asset's expected return, start with a risk-free rate (the yield on the 10-year Treasury) then add an adjusted premium. The adjusted premium added to the risk-free rate is the difference in the expected market return times the beta of the asset.