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 Micron Technology Inc. common stock.
Rates of Return
Micron Technology Inc., monthly rates of return
| Micron Technology Inc. (MU) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceMU,t1 | DividendMU,t1 | RMU,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Sep 30, 2020 | $46.96 | 3,363.00 | ||||
| 1. | Oct 31, 2020 | $50.34 | 7.20% | 3,269.96 | -2.77% | |
| 2. | Nov 30, 2020 | $64.09 | 27.31% | 3,621.63 | 10.75% | |
| 3. | Dec 31, 2020 | $75.18 | 17.30% | 3,756.07 | 3.71% | |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 69. | Jun 30, 2026 | $1,154.29 | 18.88% | 7,499.36 | -1.06% | |
| 70. | Jul 31, 2026 | $823.03 | $0.15 | -28.69% | 7,489.72 | -0.13% |
| Average (R): | 5.65% | 1.25% | ||||
| Standard deviation: | 18.62% | 4.47% | ||||
| Micron Technology Inc. (MU) | Standard & Poor’s 500 (S&P 500) | |||||
|---|---|---|---|---|---|---|
| t | Date | PriceMU,t1 | DividendMU,t1 | RMU,t2 | PriceS&P 500,t | RS&P 500,t3 |
| Sep 30, 2020 | $46.96 | 3,363.00 | ||||
| 1. | Oct 31, 2020 | $50.34 | 7.20% | 3,269.96 | -2.77% | |
| 2. | Nov 30, 2020 | $64.09 | 27.31% | 3,621.63 | 10.75% | |
| 3. | Dec 31, 2020 | $75.18 | 17.30% | 3,756.07 | 3.71% | |
| 4. | Jan 31, 2021 | $78.27 | 4.11% | 3,714.24 | -1.11% | |
| 5. | Feb 28, 2021 | $91.53 | 16.94% | 3,811.15 | 2.61% | |
| 6. | Mar 31, 2021 | $88.21 | -3.63% | 3,972.89 | 4.24% | |
| 7. | Apr 30, 2021 | $86.07 | -2.43% | 4,181.17 | 5.24% | |
| 8. | May 31, 2021 | $84.14 | -2.24% | 4,204.11 | 0.55% | |
| 9. | Jun 30, 2021 | $84.98 | 1.00% | 4,297.50 | 2.22% | |
| 10. | Jul 31, 2021 | $77.58 | -8.71% | 4,395.26 | 2.27% | |
| 11. | Aug 31, 2021 | $73.70 | -5.00% | 4,522.68 | 2.90% | |
| 12. | Sep 30, 2021 | $70.98 | $0.10 | -3.55% | 4,307.54 | -4.76% |
| 13. | Oct 31, 2021 | $69.10 | -2.65% | 4,605.38 | 6.91% | |
| 14. | Nov 30, 2021 | $84.00 | 21.56% | 4,567.00 | -0.83% | |
| 15. | Dec 31, 2021 | $93.15 | $0.10 | 11.01% | 4,766.18 | 4.36% |
| 16. | Jan 31, 2022 | $82.27 | -11.68% | 4,515.55 | -5.26% | |
| 17. | Feb 28, 2022 | $88.86 | 8.01% | 4,373.94 | -3.14% | |
| 18. | Mar 31, 2022 | $77.89 | -12.35% | 4,530.41 | 3.58% | |
| 19. | Apr 30, 2022 | $68.19 | $0.10 | -12.33% | 4,131.93 | -8.80% |
| 20. | May 31, 2022 | $73.84 | 8.29% | 4,132.15 | 0.01% | |
| 21. | Jun 30, 2022 | $55.28 | -25.14% | 3,785.38 | -8.39% | |
| 22. | Jul 31, 2022 | $61.86 | $0.115 | 12.11% | 4,130.29 | 9.11% |
| 23. | Aug 31, 2022 | $56.53 | -8.62% | 3,955.00 | -4.24% | |
| 24. | Sep 30, 2022 | $50.10 | -11.37% | 3,585.62 | -9.34% | |
| 25. | Oct 31, 2022 | $54.10 | $0.115 | 8.21% | 3,871.98 | 7.99% |
| 26. | Nov 30, 2022 | $57.65 | 6.56% | 4,080.11 | 5.38% | |
| 27. | Dec 31, 2022 | $49.98 | $0.115 | -13.10% | 3,839.50 | -5.90% |
| 28. | Jan 31, 2023 | $60.30 | 20.65% | 4,076.60 | 6.18% | |
| 29. | Feb 28, 2023 | $57.82 | -4.11% | 3,970.15 | -2.61% | |
| 30. | Mar 31, 2023 | $60.34 | 4.36% | 4,109.31 | 3.51% | |
| 31. | Apr 30, 2023 | $64.36 | $0.115 | 6.85% | 4,169.48 | 1.46% |
| 32. | May 31, 2023 | $68.20 | 5.97% | 4,179.83 | 0.25% | |
| 33. | Jun 30, 2023 | $63.11 | -7.46% | 4,376.86 | 4.71% | |
| 34. | Jul 31, 2023 | $71.39 | $0.115 | 13.30% | 4,588.96 | 4.85% |
| 35. | Aug 31, 2023 | $69.94 | -2.03% | 4,507.66 | -1.77% | |
| 36. | Sep 30, 2023 | $68.03 | -2.73% | 4,288.05 | -4.87% | |
| 37. | Oct 31, 2023 | $66.87 | $0.115 | -1.54% | 4,193.80 | -2.20% |
| 38. | Nov 30, 2023 | $76.12 | 13.83% | 4,567.80 | 8.92% | |
| 39. | Dec 31, 2023 | $85.34 | $0.115 | 12.26% | 4,769.83 | 4.42% |
| 40. | Jan 31, 2024 | $85.75 | 0.48% | 4,845.65 | 1.59% | |
| 41. | Feb 29, 2024 | $90.61 | 5.67% | 5,096.27 | 5.17% | |
| 42. | Mar 31, 2024 | $117.89 | $0.115 | 30.23% | 5,254.35 | 3.10% |
| 43. | Apr 30, 2024 | $112.96 | -4.18% | 5,035.69 | -4.16% | |
| 44. | May 31, 2024 | $125.00 | 10.66% | 5,277.51 | 4.80% | |
| 45. | Jun 30, 2024 | $131.53 | 5.22% | 5,460.48 | 3.47% | |
| 46. | Jul 31, 2024 | $109.82 | $0.115 | -16.42% | 5,522.30 | 1.13% |
| 47. | Aug 31, 2024 | $96.24 | -12.37% | 5,648.40 | 2.28% | |
| 48. | Sep 30, 2024 | $103.71 | 7.76% | 5,762.48 | 2.02% | |
| 49. | Oct 31, 2024 | $99.65 | $0.115 | -3.80% | 5,705.45 | -0.99% |
| 50. | Nov 30, 2024 | $97.95 | -1.71% | 6,032.38 | 5.73% | |
| 51. | Dec 31, 2024 | $84.16 | $0.115 | -13.96% | 5,881.63 | -2.50% |
| 52. | Jan 31, 2025 | $91.24 | 8.41% | 6,040.53 | 2.70% | |
| 53. | Feb 28, 2025 | $93.63 | 2.62% | 5,954.50 | -1.42% | |
| 54. | Mar 31, 2025 | $86.89 | $0.115 | -7.08% | 5,611.85 | -5.75% |
| 55. | Apr 30, 2025 | $76.95 | -11.44% | 5,569.06 | -0.76% | |
| 56. | May 31, 2025 | $94.46 | 22.76% | 5,911.69 | 6.15% | |
| 57. | Jun 30, 2025 | $123.25 | 30.48% | 6,204.95 | 4.96% | |
| 58. | Jul 31, 2025 | $109.14 | $0.115 | -11.35% | 6,339.39 | 2.17% |
| 59. | Aug 31, 2025 | $119.01 | 9.04% | 6,460.26 | 1.91% | |
| 60. | Sep 30, 2025 | $167.32 | 40.59% | 6,688.46 | 3.53% | |
| 61. | Oct 31, 2025 | $223.77 | $0.115 | 33.81% | 6,840.20 | 2.27% |
| 62. | Nov 30, 2025 | $236.48 | 5.68% | 6,849.09 | 0.13% | |
| 63. | Dec 31, 2025 | $285.41 | $0.115 | 20.74% | 6,845.50 | -0.05% |
| 64. | Jan 31, 2026 | $414.88 | 45.36% | 6,939.03 | 1.37% | |
| 65. | Feb 28, 2026 | $412.37 | -0.60% | 6,878.88 | -0.87% | |
| 66. | Mar 31, 2026 | $337.84 | $0.15 | -18.04% | 6,528.52 | -5.09% |
| 67. | Apr 30, 2026 | $517.16 | 53.08% | 7,209.01 | 10.42% | |
| 68. | May 31, 2026 | $971.00 | 87.76% | 7,580.06 | 5.15% | |
| 69. | Jun 30, 2026 | $1,154.29 | 18.88% | 7,499.36 | -1.06% | |
| 70. | Jul 31, 2026 | $823.03 | $0.15 | -28.69% | 7,489.72 | -0.13% |
| Average (R): | 5.65% | 1.25% | ||||
| Standard deviation: | 18.62% | 4.47% | ||||
Show all
1 Data in US$ per share of common stock, adjusted for splits and stock dividends.
2 Rate of return on common stock of MU during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
Micron Technology Inc., calculation of variance and covariance of returns
| t | Date | RMU,t | RS&P 500,t | (RMU,t–RMU)2 | (RS&P 500,t–RS&P 500)2 | (RMU,t–RMU)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Oct 31, 2020 | 7.20% | -2.77% | 2.38 | 16.12 | -6.20 |
| 2. | Nov 30, 2020 | 27.31% | 10.75% | 469.17 | 90.36 | 205.90 |
| 3. | Dec 31, 2020 | 17.30% | 3.71% | 135.72 | 6.07 | 28.70 |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| . | . | . | . | . | . | . |
| 69. | Jun 30, 2026 | 18.88% | -1.06% | 174.83 | 5.35 | -30.59 |
| 70. | Jul 31, 2026 | -28.69% | -0.13% | 1,179.18 | 1.90 | 47.29 |
| Total (Σ): | 23,916.39 | 1,378.44 | 2,908.98 | |||
| t | Date | RMU,t | RS&P 500,t | (RMU,t–RMU)2 | (RS&P 500,t–RS&P 500)2 | (RMU,t–RMU)×(RS&P 500,t–RS&P 500) |
|---|---|---|---|---|---|---|
| 1. | Oct 31, 2020 | 7.20% | -2.77% | 2.38 | 16.12 | -6.20 |
| 2. | Nov 30, 2020 | 27.31% | 10.75% | 469.17 | 90.36 | 205.90 |
| 3. | Dec 31, 2020 | 17.30% | 3.71% | 135.72 | 6.07 | 28.70 |
| 4. | Jan 31, 2021 | 4.11% | -1.11% | 2.38 | 5.58 | 3.65 |
| 5. | Feb 28, 2021 | 16.94% | 2.61% | 127.41 | 1.85 | 15.36 |
| 6. | Mar 31, 2021 | -3.63% | 4.24% | 86.14 | 8.97 | -27.80 |
| 7. | Apr 30, 2021 | -2.43% | 5.24% | 65.29 | 15.95 | -32.27 |
| 8. | May 31, 2021 | -2.24% | 0.55% | 62.35 | 0.49 | 5.53 |
| 9. | Jun 30, 2021 | 1.00% | 2.22% | 21.67 | 0.95 | -4.53 |
| 10. | Jul 31, 2021 | -8.71% | 2.27% | 206.26 | 1.05 | -14.74 |
| 11. | Aug 31, 2021 | -5.00% | 2.90% | 113.53 | 2.72 | -17.59 |
| 12. | Sep 30, 2021 | -3.55% | -4.76% | 84.80 | 36.07 | 55.30 |
| 13. | Oct 31, 2021 | -2.65% | 6.91% | 68.93 | 32.10 | -47.04 |
| 14. | Nov 30, 2021 | 21.56% | -0.83% | 253.10 | 4.33 | -33.12 |
| 15. | Dec 31, 2021 | 11.01% | 4.36% | 28.71 | 9.69 | 16.68 |
| 16. | Jan 31, 2022 | -11.68% | -5.26% | 300.47 | 42.34 | 112.79 |
| 17. | Feb 28, 2022 | 8.01% | -3.14% | 5.55 | 19.23 | -10.33 |
| 18. | Mar 31, 2022 | -12.35% | 3.58% | 323.97 | 5.42 | -41.92 |
| 19. | Apr 30, 2022 | -12.33% | -8.80% | 323.25 | 100.89 | 180.59 |
| 20. | May 31, 2022 | 8.29% | 0.01% | 6.93 | 1.55 | -3.27 |
| 21. | Jun 30, 2022 | -25.14% | -8.39% | 947.99 | 92.94 | 296.83 |
| 22. | Jul 31, 2022 | 12.11% | 9.11% | 41.69 | 61.83 | 50.77 |
| 23. | Aug 31, 2022 | -8.62% | -4.24% | 203.64 | 30.17 | 78.38 |
| 24. | Sep 30, 2022 | -11.37% | -9.34% | 289.97 | 112.11 | 180.30 |
| 25. | Oct 31, 2022 | 8.21% | 7.99% | 6.55 | 45.40 | 17.25 |
| 26. | Nov 30, 2022 | 6.56% | 5.38% | 0.82 | 17.03 | 3.75 |
| 27. | Dec 31, 2022 | -13.10% | -5.90% | 351.90 | 51.06 | 134.05 |
| 28. | Jan 31, 2023 | 20.65% | 6.18% | 224.83 | 24.27 | 73.87 |
| 29. | Feb 28, 2023 | -4.11% | -2.61% | 95.39 | 14.90 | 37.70 |
| 30. | Mar 31, 2023 | 4.36% | 3.51% | 1.68 | 5.09 | -2.92 |
| 31. | Apr 30, 2023 | 6.85% | 1.46% | 1.44 | 0.05 | 0.26 |
| 32. | May 31, 2023 | 5.97% | 0.25% | 0.10 | 1.00 | -0.31 |
| 33. | Jun 30, 2023 | -7.46% | 4.71% | 172.06 | 12.01 | -45.45 |
| 34. | Jul 31, 2023 | 13.30% | 4.85% | 58.50 | 12.94 | 27.51 |
| 35. | Aug 31, 2023 | -2.03% | -1.77% | 59.06 | 9.12 | 23.21 |
| 36. | Sep 30, 2023 | -2.73% | -4.87% | 70.31 | 37.46 | 51.32 |
| 37. | Oct 31, 2023 | -1.54% | -2.20% | 51.70 | 11.88 | 24.78 |
| 38. | Nov 30, 2023 | 13.83% | 8.92% | 66.89 | 58.82 | 62.73 |
| 39. | Dec 31, 2023 | 12.26% | 4.42% | 43.69 | 10.08 | 20.98 |
| 40. | Jan 31, 2024 | 0.48% | 1.59% | 26.77 | 0.12 | -1.76 |
| 41. | Feb 29, 2024 | 5.67% | 5.17% | 0.00 | 15.39 | 0.05 |
| 42. | Mar 31, 2024 | 30.23% | 3.10% | 604.18 | 3.43 | 45.55 |
| 43. | Apr 30, 2024 | -4.18% | -4.16% | 96.74 | 29.27 | 53.21 |
| 44. | May 31, 2024 | 10.66% | 4.80% | 25.05 | 12.63 | 17.78 |
| 45. | Jun 30, 2024 | 5.22% | 3.47% | 0.18 | 4.92 | -0.95 |
| 46. | Jul 31, 2024 | -16.42% | 1.13% | 487.18 | 0.01 | 2.57 |
| 47. | Aug 31, 2024 | -12.37% | 2.28% | 324.71 | 1.07 | -18.65 |
| 48. | Sep 30, 2024 | 7.76% | 2.02% | 4.44 | 0.59 | 1.63 |
| 49. | Oct 31, 2024 | -3.80% | -0.99% | 89.45 | 5.01 | 21.17 |
| 50. | Nov 30, 2024 | -1.71% | 5.73% | 54.17 | 20.08 | -32.98 |
| 51. | Dec 31, 2024 | -13.96% | -2.50% | 384.75 | 14.04 | 73.51 |
| 52. | Jan 31, 2025 | 8.41% | 2.70% | 7.61 | 2.11 | 4.01 |
| 53. | Feb 28, 2025 | 2.62% | -1.42% | 9.21 | 7.14 | 8.11 |
| 54. | Mar 31, 2025 | -7.08% | -5.75% | 162.04 | 49.04 | 89.15 |
| 55. | Apr 30, 2025 | -11.44% | -0.76% | 292.19 | 4.04 | 34.38 |
| 56. | May 31, 2025 | 22.76% | 6.15% | 292.45 | 24.05 | 83.86 |
| 57. | Jun 30, 2025 | 30.48% | 4.96% | 616.26 | 13.78 | 92.15 |
| 58. | Jul 31, 2025 | -11.35% | 2.17% | 289.30 | 0.84 | -15.62 |
| 59. | Aug 31, 2025 | 9.04% | 1.91% | 11.49 | 0.43 | 2.23 |
| 60. | Sep 30, 2025 | 40.59% | 3.53% | 1,220.75 | 5.22 | 79.79 |
| 61. | Oct 31, 2025 | 33.81% | 2.27% | 792.56 | 1.04 | 28.72 |
| 62. | Nov 30, 2025 | 5.68% | 0.13% | 0.00 | 1.25 | -0.03 |
| 63. | Dec 31, 2025 | 20.74% | -0.05% | 227.58 | 1.69 | -19.63 |
| 64. | Jan 31, 2026 | 45.36% | 1.37% | 1,576.79 | 0.01 | 4.67 |
| 65. | Feb 28, 2026 | -0.60% | -0.87% | 39.17 | 4.48 | 13.24 |
| 66. | Mar 31, 2026 | -18.04% | -5.09% | 561.27 | 40.22 | 150.25 |
| 67. | Apr 30, 2026 | 53.08% | 10.42% | 2,249.08 | 84.18 | 435.11 |
| 68. | May 31, 2026 | 87.76% | 5.15% | 6,740.78 | 15.20 | 320.07 |
| 69. | Jun 30, 2026 | 18.88% | -1.06% | 174.83 | 5.35 | -30.59 |
| 70. | Jul 31, 2026 | -28.69% | -0.13% | 1,179.18 | 1.90 | 47.29 |
| Total (Σ): | 23,916.39 | 1,378.44 | 2,908.98 | |||
Show all
VarianceMU = Σ(RMU,t–RMU)2 ÷ (70 – 1)
= 23,916.39 ÷ (70 – 1)
= 346.61
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (70 – 1)
= 1,378.44 ÷ (70 – 1)
= 19.98
CovarianceMU, S&P 500 = Σ(RMU,t–RMU)×(RS&P 500,t–RS&P 500) ÷ (70 – 1)
= 2,908.98 ÷ (70 – 1)
= 42.16
Systematic Risk (β) Estimation
| VarianceMU | 346.61 |
| VarianceS&P 500 | 19.98 |
| CovarianceMU, S&P 500 | 42.16 |
| Correlation coefficientMU, S&P 5001 | 0.51 |
| βMU2 | 2.11 |
| αMU3 | 3.02% |
Calculations
1 Correlation coefficientMU, S&P 500
= CovarianceMU, S&P 500 ÷ (Standard deviationMU × Standard deviationS&P 500)
= 42.16 ÷ (18.62% × 4.47%)
= 0.51
2 βMU
= CovarianceMU, S&P 500 ÷ VarianceS&P 500
= 42.16 ÷ 19.98
= 2.11
3 αMU
= AverageMU – βMU × AverageS&P 500
= 5.65% – 2.11 × 1.25%
= 3.02%
Expected Rate of Return
| Assumptions | ||
| Rate of return on LT Treasury Composite1 | RF | 5.64% |
| Expected rate of return on market portfolio2 | E(RM) | 17.45% |
| Systematic risk (β) of Micron Technology Inc. common stock | βMU | 2.11 |
| Expected rate of return on Micron Technology Inc. common stock3 | E(RMU) | 30.57% |
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).
3 E(RMU) = RF + βMU [E(RM) – RF]
= 5.64% + 2.11 [17.45% – 5.64%]
= 30.57%