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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, 2012 hidden hidden
1. Sep 30, 2012 hidden hidden hidden hidden
2. Oct 31, 2012 hidden hidden hidden hidden hidden
3. Nov 30, 2012 hidden hidden hidden hidden hidden
. . . . . . .
. . . . . . .
. . . . . . .
70. Jun 30, 2018 hidden hidden hidden hidden
71. Jul 31, 2018 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, 2012 hidden hidden
1. Sep 30, 2012 hidden hidden hidden hidden
2. Oct 31, 2012 hidden hidden hidden hidden hidden
3. Nov 30, 2012 hidden hidden hidden hidden hidden
4. Dec 31, 2012 hidden hidden hidden hidden
5. Jan 31, 2013 hidden hidden hidden hidden
6. Feb 28, 2013 hidden hidden hidden hidden
7. Mar 31, 2013 hidden hidden hidden hidden
8. Apr 30, 2013 hidden hidden hidden hidden hidden
9. May 31, 2013 hidden hidden hidden hidden
10. Jun 30, 2013 hidden hidden hidden hidden
11. Jul 31, 2013 hidden hidden hidden hidden hidden
12. Aug 31, 2013 hidden hidden hidden hidden
13. Sep 30, 2013 hidden hidden hidden hidden
14. Oct 31, 2013 hidden hidden hidden hidden hidden
15. Nov 30, 2013 hidden hidden hidden hidden
16. Dec 31, 2013 hidden hidden hidden hidden
17. Jan 31, 2014 hidden hidden hidden hidden hidden
18. Feb 28, 2014 hidden hidden hidden hidden
19. Mar 31, 2014 hidden hidden hidden hidden
20. Apr 30, 2014 hidden hidden hidden hidden hidden
21. May 31, 2014 hidden hidden hidden hidden
22. Jun 30, 2014 hidden hidden hidden hidden
23. Jul 31, 2014 hidden hidden hidden hidden hidden
24. Aug 31, 2014 hidden hidden hidden hidden
25. Sep 30, 2014 hidden hidden hidden hidden hidden
26. Oct 31, 2014 hidden hidden hidden hidden
27. Nov 30, 2014 hidden hidden hidden hidden
28. Dec 31, 2014 hidden hidden hidden hidden
29. Jan 31, 2015 hidden hidden hidden hidden hidden
30. Feb 28, 2015 hidden hidden hidden hidden
31. Mar 31, 2015 hidden hidden hidden hidden hidden
32. Apr 30, 2015 hidden hidden hidden hidden
33. May 31, 2015 hidden hidden hidden hidden
34. Jun 30, 2015 hidden hidden hidden hidden
35. Jul 31, 2015 hidden hidden hidden hidden hidden
36. Aug 31, 2015 hidden hidden hidden hidden
37. Sep 30, 2015 hidden hidden hidden hidden
38. Oct 31, 2015 hidden hidden hidden hidden hidden
39. Nov 30, 2015 hidden hidden hidden hidden
40. Dec 31, 2015 hidden hidden hidden hidden
41. Jan 31, 2016 hidden hidden hidden hidden hidden
42. Feb 29, 2016 hidden hidden hidden hidden
43. Mar 31, 2016 hidden hidden hidden hidden
44. Apr 30, 2016 hidden hidden hidden hidden hidden
45. May 31, 2016 hidden hidden hidden hidden
46. Jun 30, 2016 hidden hidden hidden hidden
47. Jul 31, 2016 hidden hidden hidden hidden hidden
48. Aug 31, 2016 hidden hidden hidden hidden
49. Sep 30, 2016 hidden hidden hidden hidden
50. Oct 31, 2016 hidden hidden hidden hidden hidden
51. Nov 30, 2016 hidden hidden hidden hidden
52. Dec 31, 2016 hidden hidden hidden hidden
53. Jan 31, 2017 hidden hidden hidden hidden hidden
54. Feb 28, 2017 hidden hidden hidden hidden
55. Mar 31, 2017 hidden hidden hidden hidden
56. Apr 30, 2017 hidden hidden hidden hidden hidden
57. May 31, 2017 hidden hidden hidden hidden
58. Jun 30, 2017 hidden hidden hidden hidden
59. Jul 31, 2017 hidden hidden hidden hidden hidden
60. Aug 31, 2017 hidden hidden hidden hidden
61. Sep 30, 2017 hidden hidden hidden hidden
62. Oct 31, 2017 hidden hidden hidden hidden hidden
63. Nov 30, 2017 hidden hidden hidden hidden
64. Dec 31, 2017 hidden hidden hidden hidden
65. Jan 31, 2018 hidden hidden hidden hidden hidden
66. Feb 28, 2018 hidden hidden hidden hidden
67. Mar 31, 2018 hidden hidden hidden hidden
68. Apr 30, 2018 hidden hidden hidden hidden hidden
69. May 31, 2018 hidden hidden hidden hidden
70. Jun 30, 2018 hidden hidden hidden hidden
71. Jul 31, 2018 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 [hiddenhidden]
= hidden