Source: https://guthlabs.ai/docs/instruments/capm-expected-return/

instrument / verified-clean

# CAPM Expected Return

The current ledger marks this instrument verified clean within the source-bound verification corpus.

Status: **VERIFIED_CLEAN**Lifecycle: **verified-clean**

## Inspectable records

[01**Overview**Purpose and lifecycle](<https://guthlabs.ai/docs/instruments/capm-expected-return/>)[02**Mechanism**Method and assumptions](<https://guthlabs.ai/docs/instruments/capm-expected-return/mechanism/>)[03**Implementation**Binding and validation](<https://guthlabs.ai/docs/instruments/capm-expected-return/implementation/>)[04**Qualification**Evidence and errata](<https://guthlabs.ai/docs/instruments/capm-expected-return/qualification/>)

## Ledger state

The current ledger marks this instrument verified clean within the source-bound verification corpus.

**Area**: Finance, Economics & Business (educational only — never individualized investment, tax, or legal advice)

**Tranche**: tranche-4

**Evidence ID**: t4-188

**Ledger rows**: 1

No ledger note is attached.

## Review findings

The formula E(R)=Rf+β(Rm−Rf) is the standard single-factor CAPM expected-return formula. The specification is otherwise correct, but it is ambiguous whether rate inputs are decimal fractions or percentage points, so the panel needs an explicit unit convention and conversion/display rule. The honest educational-model label is appropriate; CAPM output is a model-implied expected return, not a guaranteed forecast.

### Formula and scope findings

No additional record

### Unit assumptions

- Rf and Rm must be expressed in the same units, either decimal fractions or percentage points; beta is dimensionless.

- The numeric input format is unspecified: for example, 0.05 can mean 5% as a decimal fraction, while 5 can mean 5 percentage points.

- Expected return is reported as a percentage; decimal-fraction results must be multiplied by 100 for display.

## Boundary hardening

**BREAK_CLAIMED** · SELF_FLAGGED

An extreme but syntactically numeric input produces a non-finite +Infinity result through floating-point overflow. A robust instrument should reject non-finite inputs or flag the non-finite output rather than display it as an expected return.

## Errata and corrections

No applied erratum is attached to this unique-name record.

## Inspectable example

4 review vectors are recorded. One source-bound sample is shown below.

````
{
  "inputs": {
    "risk_free_rate": 0.04,
    "beta": 1.2,
    "market_return": 0.1,
    "rate_unit": "decimal fraction"
  },
  "expected_outputs": {
    "expected_return_percent": 11.2
  },
  "working": "E(R) = 0.04 + 1.2 × (0.10 − 0.04) = 0.04 + 1.2 × 0.06 = 0.04 + 0.072 = 0.112 = 11.2%."
}
````

## Related workflows

[Investor's Valuation Benchcost of equity](<https://guthlabs.ai/docs/instrument-workflows/valuation-bench/>)

## Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

- `VERIFIED_LEDGER.json · VERIFIED_CLEAN`

- `evidence-tranche4/tranche4-results.json`

- `BOUNDARY_HAZARD_CATALOG.json`