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Microsoft Excel LibreOffice Calc


Capital Asset Pricing Model (CAPM)

Difficulty: Intermediate


Rates of Return

Cisco Systems Inc., monthly rates of return

Microsoft Excel LibreOffice Calc
Cisco Systems Inc. (CSCO) Standard & Poor's 500 (S&P 500)
t Date PriceCSCO,t1 DividendCSCO,t1 RCSCO,t2 PriceS&P 500,t RS&P 500,t3
Aug 31, 2011 hidden hidden
1. Sep 30, 2011 hidden hidden% hidden hidden%
2. Oct 31, 2011 hidden hidden hidden% hidden hidden%
3. Nov 30, 2011 hidden hidden% hidden hidden%
. . . . . . .
. . . . . . .
. . . . . . .
70. Jun 30, 2017 hidden hidden% hidden hidden%
71. Jul 31, 2017 hidden hidden hidden% hidden hidden%
Average: hidden% hidden%
Standard Deviation: hidden% hidden%
Cisco Systems Inc. (CSCO) Standard & Poor's 500 (S&P 500)
t Date PriceCSCO,t1 DividendCSCO,t1 RCSCO,t2 PriceS&P 500,t RS&P 500,t3
Aug 31, 2011 hidden hidden
1. Sep 30, 2011 hidden hidden% hidden hidden%
2. Oct 31, 2011 hidden hidden hidden% hidden hidden%
3. Nov 30, 2011 hidden hidden% hidden hidden%
4. Dec 31, 2011 hidden hidden% hidden hidden%
5. Jan 31, 2012 hidden hidden hidden% hidden hidden%
6. Feb 29, 2012 hidden hidden% hidden hidden%
7. Mar 31, 2012 hidden hidden% hidden hidden%
8. Apr 30, 2012 hidden hidden hidden% hidden hidden%
9. May 31, 2012 hidden hidden% hidden hidden%
10. Jun 30, 2012 hidden hidden% hidden hidden%
11. Jul 31, 2012 hidden hidden hidden% hidden hidden%
12. Aug 31, 2012 hidden hidden% hidden hidden%
13. Sep 30, 2012 hidden hidden% hidden hidden%
14. Oct 31, 2012 hidden hidden hidden% hidden hidden%
15. Nov 30, 2012 hidden hidden hidden% hidden hidden%
16. Dec 31, 2012 hidden hidden% hidden hidden%
17. Jan 31, 2013 hidden hidden% hidden hidden%
18. Feb 28, 2013 hidden hidden% hidden hidden%
19. Mar 31, 2013 hidden hidden% hidden hidden%
20. Apr 30, 2013 hidden hidden hidden% hidden hidden%
21. May 31, 2013 hidden hidden% hidden hidden%
22. Jun 30, 2013 hidden hidden% hidden hidden%
23. Jul 31, 2013 hidden hidden hidden% hidden hidden%
24. Aug 31, 2013 hidden hidden% hidden hidden%
25. Sep 30, 2013 hidden hidden% hidden hidden%
26. Oct 31, 2013 hidden hidden hidden% hidden hidden%
27. Nov 30, 2013 hidden hidden% hidden hidden%
28. Dec 31, 2013 hidden hidden% hidden hidden%
29. Jan 31, 2014 hidden hidden hidden% hidden hidden%
30. Feb 28, 2014 hidden hidden% hidden hidden%
31. Mar 31, 2014 hidden hidden% hidden hidden%
32. Apr 30, 2014 hidden hidden hidden% hidden hidden%
33. May 31, 2014 hidden hidden% hidden hidden%
34. Jun 30, 2014 hidden hidden% hidden hidden%
35. Jul 31, 2014 hidden hidden hidden% hidden hidden%
36. Aug 31, 2014 hidden hidden% hidden hidden%
37. Sep 30, 2014 hidden hidden hidden% hidden hidden%
38. Oct 31, 2014 hidden hidden% hidden hidden%
39. Nov 30, 2014 hidden hidden% hidden hidden%
40. Dec 31, 2014 hidden hidden% hidden hidden%
41. Jan 31, 2015 hidden hidden hidden% hidden hidden%
42. Feb 28, 2015 hidden hidden% hidden hidden%
43. Mar 31, 2015 hidden hidden hidden% hidden hidden%
44. Apr 30, 2015 hidden hidden% hidden hidden%
45. May 31, 2015 hidden hidden% hidden hidden%
46. Jun 30, 2015 hidden hidden% hidden hidden%
47. Jul 31, 2015 hidden hidden hidden% hidden hidden%
48. Aug 31, 2015 hidden hidden% hidden hidden%
49. Sep 30, 2015 hidden hidden% hidden hidden%
50. Oct 31, 2015 hidden hidden hidden% hidden hidden%
51. Nov 30, 2015 hidden hidden% hidden hidden%
52. Dec 31, 2015 hidden hidden% hidden hidden%
53. Jan 31, 2016 hidden hidden hidden% hidden hidden%
54. Feb 29, 2016 hidden hidden% hidden hidden%
55. Mar 31, 2016 hidden hidden% hidden hidden%
56. Apr 30, 2016 hidden hidden hidden% hidden hidden%
57. May 31, 2016 hidden hidden% hidden hidden%
58. Jun 30, 2016 hidden hidden% hidden hidden%
59. Jul 31, 2016 hidden hidden hidden% hidden hidden%
60. Aug 31, 2016 hidden hidden% hidden hidden%
61. Sep 30, 2016 hidden hidden% hidden hidden%
62. Oct 31, 2016 hidden hidden hidden% hidden hidden%
63. Nov 30, 2016 hidden hidden% hidden hidden%
64. Dec 31, 2016 hidden hidden% hidden hidden%
65. Jan 31, 2017 hidden hidden hidden% hidden hidden%
66. Feb 28, 2017 hidden hidden% hidden hidden%
67. Mar 31, 2017 hidden hidden% hidden hidden%
68. Apr 30, 2017 hidden hidden hidden% hidden hidden%
69. May 31, 2017 hidden hidden% hidden hidden%
70. Jun 30, 2017 hidden hidden% hidden hidden%
71. Jul 31, 2017 hidden hidden hidden% hidden hidden%
Average: hidden% hidden%
Standard Deviation: hidden% hidden%

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 CSCO during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceCSCO hidden
VarianceS&P 500 hidden
CovarianceCSCO, S&P 500 hidden
Correlation CoefficientCSCO, S&P 5001 hidden
βCSCO2 hidden
αCSCO3 hidden

Calculations

1 CovarianceCSCO, S&P 500 ÷ (Standard DeviationCSCO × Standard DeviationS&P 500)
= hidden ÷ (hidden × hidden)

2 CovarianceCSCO, S&P 500 ÷ VarianceS&P 500
= hidden ÷ hidden

3 AverageCSCO – βCSCO × AverageS&P 500
= hiddenhidden × hidden


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF hidden%
Expected rate of return on market portfolio2 E(RM) hidden%
Systematic risk (β) of Cisco's common stock βCSCO hidden
Expected rate of return on Cisco's common stock3 E(RCSCO) hidden%

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(RCSCO) = RF + βCSCO [E(RM) – RF]
= hidden% + hidden [hidden% – hidden%]
= hidden%