Overview

The CAPM Excel template is a great tool to calculate the required rate of return for investing in a security or portfolio of securities when you have the risk-free return, risk premium, and beta of the portfolio/security. Capital Asset Pricing Model (CAPM) is a model used to price securities returns, it is a great tool to quantify the risk-return relationship of security. It essentially tries to price the systematic risk an investor has for carrying a stock, and quantify the required return for that stock. The CAPM formula is given as:

 

Expected Return on a security = Risk-free Rate + [ Beta x Equity Risk Premium]

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