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fin.CAPM-beta-expected-return Calculator
Calculates CAPM beta from covariance of asset and market returns, and derives the required return and alpha. Beta of 1.5 means the asset moves 50% more than the market — alpha is the return in excess of what beta predicts.
Inputs
Rf Pct
Return on a theoretically safe investment like a government T-bill. The baseline return everything else is compared against. Enter as a decimal (e.g. 0.05 for 5%).
Rm Pct
Reference formula or conversion factor shown for context.
Beta
Reference formula or conversion factor shown for context.
Results
expected return E(r)
Sample size or count used in the calculation.
equity risk premium ERP
The price paid for the option or insurance coverage. Option premium = intrinsic value + time value + volatility premium.
alpha required above Rf
pH of the solution. Below 7: acidic. 7: neutral. Above 7: basic (alkaline).
E(r) = Rf + β·(Rm − Rf)
Reference formula or conversion factor shown for context.
beta interpretation
Qualitative summary of what the computed numbers mean in practical terms.
Sharpe ratio (rough)
Risk-adjusted return: (portfolio return − risk-free rate) / standard deviation. Above 1: good. Above 2: very good. Above 3: excellent. Below 0: worse than the risk-free rate.