Risk-free rate of interest(given the expected return and the sensitivity of the expected excess asset returns)

Formula

Risk-free rate of interest(given the expected return and the sensitivity of the expected excess asset returns) formula
ERm
expected return of the market
ERi
expected return on the capital asset
Rf
risk-free rate of interest such as interest arising from government bonds
betai
sensitivity of the expected excess asset returns to the expected excess market returns

Formula description

In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's non-diversifiable risk.

Calculator (how to use calculator?)

Risk-free rate of interest(given the expected return and the sensitivity of the expected excess asset returns) formula
ERi
Rf
betai
ERm
Precision

Formula code

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References

  1. wikipedia:Capital asset pricing model.

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