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.

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## 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?

**First, determine a risk free rate.**Calculate the risk free rate of a risk free asset like a bond.

**Next, determine the beta coefficient.**Calculate the beta coefficient of the stock/investment.

**Next, determine the expected return.**Calculate the expected return.

**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.

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