How to calculate CAPM :

It is the relationship between the expected return and risk of investing in a security.The below formula is used to determines the expected return of a particular asset or investment.

CAPM Formula :

E(R_i) = R_f + [ E(R_m) - R_f ] × β_i

Where,

E(R_i) - the expected return on the capital asset

R_f - the risk-free rate

E(R_m) - the expected return of the market

β_i - the beta of the security i

Risk Free Rate of Return Formula :

Risk-free rate of return is an investment with zero risks.The risk-free rate is generally used is the United States 10 year government bond.

Risk Free Rate of Return = (1+ Government Bond Rate)(1+Inflation Rate)