Enter the risk-free rate, beta coefficient of the stock, and the expected return from the market into the calculator to determine the required rate of return.

## Required Rate of Return Formula

The following formula is used to calculate the required rate of return of an asset or stock.

RR = RFR – B * (RM-RFR)

• Where RR is the required rate of return
• RFR is the risk-free rate of return
• B is the beta coefficient of the stock or asset
• RM is the expected return of the market

## Required Rate of Return Definition

A required rate of return is the minimum return a business or individual seeks to meet on a project, asset, or investment.

## Required Rate of Return Example

How to calculate a required rate of return?

1. First, determine a risk free rate.

Calculate the risk-free rate of a risk-free asset like a bond.

2. Next, determine the beta coefficient.

Calculate the beta coefficient of the stock/investment.

3. Next, determine the expected return.

Calculate the expected return.

4. Finally, calculate the required return.

Calculate the required return using the equation above.

## FAQ

What is a required rate of return?

A required rate of return is a minimum return a company seeks to achieve when investing in a certain stock or project.

What is a beta coefficient?

A beta coefficient is the measure of covariance between a particular stock and the overall mark divided by the overall variance of the market.