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Coca-Cola Co. (KO) | Capital Asset Pricing Model (CAPM)

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like 's common stock.

Rates of Return

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Coca-Cola Co., monthly rates of return

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    Coca-Cola Co. (KO) NYSE Composite Index (NYC)
t Date PriceKO,t1 DividendKO,t1 RKO,t2 PriceNYC,t RNYC,t3
  Jan 31, 2008      
1. Feb 29, 2008   % %
2. Mar 31, 2008 % %
3. Apr 30, 2008   % %
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2012 % %
59. Dec 31, 2012   % %
Average: %   %
Standard Deviation: %   %
    Coca-Cola Co. (KO) NYSE Composite Index (NYC)
t Date PriceKO,t1 DividendKO,t1 RKO,t2 PriceNYC,t RNYC,t3
  Jan 31, 2008      
1. Feb 29, 2008   % %
2. Mar 31, 2008 % %
3. Apr 30, 2008   % %
4. May 31, 2008   % %
5. Jun 30, 2008 % %
6. Jul 31, 2008   % %
7. Aug 31, 2008   % %
8. Sep 30, 2008 % %
9. Oct 31, 2008   % %
10. Nov 30, 2008 % %
11. Dec 31, 2008   % %
12. Jan 31, 2009   % %
13. Feb 28, 2009   % %
14. Mar 31, 2009 % %
15. Apr 30, 2009   % %
16. May 31, 2009   % %
17. Jun 30, 2009 % %
18. Jul 31, 2009   % %
19. Aug 31, 2009   % %
20. Sep 30, 2009 % %
21. Oct 31, 2009   % %
22. Nov 30, 2009 % %
23. Dec 31, 2009   % %
24. Jan 31, 2010   % %
25. Feb 28, 2010   % %
26. Mar 31, 2010 % %
27. Apr 30, 2010   % %
28. May 31, 2010   % %
29. Jun 30, 2010 % %
30. Jul 31, 2010   % %
31. Aug 31, 2010   % %
32. Sep 30, 2010 % %
33. Oct 31, 2010   % %
34. Nov 30, 2010 % %
35. Dec 31, 2010   % %
36. Jan 31, 2011   % %
37. Feb 28, 2011   % %
38. Mar 31, 2011 % %
39. Apr 30, 2011   % %
40. May 31, 2011   % %
41. Jun 30, 2011 % %
42. Jul 31, 2011   % %
43. Aug 31, 2011   % %
44. Sep 30, 2011 % %
45. Oct 31, 2011   % %
46. Nov 30, 2011 % %
47. Dec 31, 2011   % %
48. Jan 31, 2012   % %
49. Feb 29, 2012   % %
50. Mar 31, 2012 % %
51. Apr 30, 2012   % %
52. May 31, 2012   % %
53. Jun 30, 2012 % %
54. Jul 31, 2012   % %
55. Aug 31, 2012   % %
56. Sep 30, 2012 % %
57. Oct 31, 2012   % %
58. Nov 30, 2012 % %
59. Dec 31, 2012   % %
Average: %   %
Standard Deviation: %   %

ˇ Show All

1 Data in USD $ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of KO during period t

3 Rate of return on NYC (the market portfolio proxy) during period t

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Systematic Risk (β) Estimation

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VarianceKO
VarianceNYC
CovarianceKO,NYC
Correlation CoefficientKO,NYC1
βKO2
αKO3

Calculations

1 CovarianceKO,NYC ÷ (Standard DeviationKO × Standard DeviationNYC)
= ÷ ( × )

2 CovarianceKO,NYC ÷ VarianceNYC
= ÷

3 AverageKO – βKO × AverageNYC
= – ×

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Expected Rate of Return

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Assumptions
Rate of return on LT Treasury Composite1 RF %
Expected rate of return on market portfolio2 E(RM) %
Systematic risk (β) of 's common stock βKO
 
Expected rate of return on 's common stock3 E(RKO) %

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

Calculations

2 See Details »

3 E(RKO) = RF + βKO [E(RM) – RF]
= % + [% – %]
= %

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