**How to Calculate CAPM?**

**CAPM Formula with its components**

E_{r} = R_{f} + [B_{i} x (R_{m} – R_{rf})]

- E
_{r}= expected return of investment - R
_{f}= risk free rate - B
_{i}– beta of investment - R
_{m}= Expected return on the market - R
_{m}– R_{rf}– market risk premium

**Step 1:** Input the values which act as input for the CAPM Model. The details of the input will be available online as mentioned in the sources.

**Step 2.** Calculate Expected Return using the CAPM Formula.

* Expected Return:* Risk Free Rate + Beta *(Expected Market Return – Risk Free rate)

Expected return = 8,7%

**CAPM with Country Risk premium(CRP) – For Foreign Investments**

Country Risk premium is the addition return that an investor can expect if he is investing in a foreign company.

*When to use CRP?*

- If the investment is done in foreign land, overseas investment
- If there is higher political and geographical risk associated with this risk
- CRP for developing / turbulent countries is higher than developed countries. The higher the risk of a country the higher the value of CRP.

**Formula:**

*Expected Return: Risk Free Rate + Beta *(Expected Market Return – Risk Free rate) + Country Risk Premium*

Expected return = 24,7%

**Template**

You can download the Template here – Download

Further reading: Basic concepts Getting started with Excel Cell References