Finance
Calculate expected return with CAPM
=B1+B2*(B3-B1)How it works in Excel
- B1 is the risk-free rate.
- B2 is the stock's beta.
- B3-B1 is the extra return the market pays for risk.
- B3-B1 is called the market risk premium.
- Treasury yields are a common choice for the risk-free rate.
- Format the cell as a percentage.
The idea in general
A riskier stock should pay more, and this says how much more.
What I assumed
- The risk-free rate is in B1, beta is in B2 and the market return is in B3.
Check the result on your own data before relying on it.