If you know the risk-free rate, the market risk-premium, and the beta of a share, then using the CAPM you will be able to calculate the expected rate of return for the share.

Question

Quizplus · Accepted Answer

According to the Capital Asset Pricing Model (CAPM), the expected rate of return on a share is calculated using the risk-free rate, the market risk-premium, and the beta of the share. Therefore, if you know these three inputs, you can calculate the expected rate of return for the share using the CAPM formula.

If You Know the Risk-Free Rate, the Market Risk-Premium, and the Beta