Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Microsoft Corp. (NASDAQ:MSFT)

Capital Asset Pricing Model (CAPM)

Intermediate level

Rates of Return

Microsoft Corp., monthly rates of return

Microsoft Excel LibreOffice Calc
Microsoft Corp. (MSFT) Standard & Poor’s 500 (S&P 500)
t Date PriceMSFT,t1 DividendMSFT,t1 RMSFT,t2 PriceS&P 500,t RS&P 500,t3
Jul 31, 2014 $43.16 1,930.67
1. Aug 31, 2014 $45.43 $0.28 5.91% 2,003.37 3.77%
2. Sep 30, 2014 $46.36 2.05% 1,972.29 -1.55%
3. Oct 31, 2014 $46.95 1.27% 2,018.05 2.32%
. . . . . . .
. . . . . . .
. . . . . . .
70. May 31, 2020 $183.25 $0.51 2.54% 3,044.31 4.53%
71. Jun 30, 2020 $203.51 11.06% 3,100.29 1.84%
Average (R): 2.57% 0.75%
Standard deviation: 6.12% 4.04%
Microsoft Corp. (MSFT) Standard & Poor’s 500 (S&P 500)
t Date PriceMSFT,t1 DividendMSFT,t1 RMSFT,t2 PriceS&P 500,t RS&P 500,t3
Jul 31, 2014 $43.16 1,930.67
1. Aug 31, 2014 $45.43 $0.28 5.91% 2,003.37 3.77%
2. Sep 30, 2014 $46.36 2.05% 1,972.29 -1.55%
3. Oct 31, 2014 $46.95 1.27% 2,018.05 2.32%
4. Nov 30, 2014 $47.81 $0.31 2.49% 2,067.56 2.45%
5. Dec 31, 2014 $46.45 -2.84% 2,058.90 -0.42%
6. Jan 31, 2015 $40.40 -13.02% 1,994.99 -3.10%
7. Feb 28, 2015 $43.85 $0.31 9.31% 2,104.50 5.49%
8. Mar 31, 2015 $40.66 -7.27% 2,067.89 -1.74%
9. Apr 30, 2015 $48.64 19.63% 2,085.51 0.85%
10. May 31, 2015 $46.86 $0.31 -3.02% 2,107.39 1.05%
11. Jun 30, 2015 $44.15 -5.78% 2,063.11 -2.10%
12. Jul 31, 2015 $46.70 5.78% 2,103.84 1.97%
13. Aug 31, 2015 $43.52 $0.31 -6.15% 1,972.18 -6.26%
14. Sep 30, 2015 $44.26 1.70% 1,920.03 -2.64%
15. Oct 31, 2015 $52.64 18.93% 2,079.36 8.30%
16. Nov 30, 2015 $54.35 $0.36 3.93% 2,080.41 0.05%
17. Dec 31, 2015 $55.48 2.08% 2,043.94 -1.75%
18. Jan 31, 2016 $55.09 -0.70% 1,940.24 -5.07%
19. Feb 29, 2016 $50.88 $0.36 -6.99% 1,932.23 -0.41%
20. Mar 31, 2016 $55.23 8.55% 2,059.74 6.60%
21. Apr 30, 2016 $49.87 -9.70% 2,065.30 0.27%
22. May 31, 2016 $53.00 $0.36 7.00% 2,096.95 1.53%
23. Jun 30, 2016 $51.17 -3.45% 2,098.86 0.09%
24. Jul 31, 2016 $56.68 10.77% 2,173.60 3.56%
25. Aug 31, 2016 $57.46 $0.36 2.01% 2,170.95 -0.12%
26. Sep 30, 2016 $57.60 0.24% 2,168.27 -0.12%
27. Oct 31, 2016 $59.92 4.03% 2,126.15 -1.94%
28. Nov 30, 2016 $60.26 $0.39 1.22% 2,198.81 3.42%
29. Dec 31, 2016 $62.14 3.12% 2,238.83 1.82%
30. Jan 31, 2017 $64.65 4.04% 2,278.87 1.79%
31. Feb 28, 2017 $63.98 $0.39 -0.43% 2,363.64 3.72%
32. Mar 31, 2017 $65.86 2.94% 2,362.72 -0.04%
33. Apr 30, 2017 $68.46 3.95% 2,384.20 0.91%
34. May 31, 2017 $69.84 $0.39 2.59% 2,411.80 1.16%
35. Jun 30, 2017 $68.93 -1.30% 2,423.41 0.48%
36. Jul 31, 2017 $72.70 5.47% 2,470.30 1.93%
37. Aug 31, 2017 $74.77 $0.39 3.38% 2,471.65 0.05%
38. Sep 30, 2017 $74.49 -0.37% 2,519.36 1.93%
39. Oct 31, 2017 $83.18 11.67% 2,575.26 2.22%
40. Nov 30, 2017 $84.17 $0.42 1.70% 2,647.58 2.81%
41. Dec 31, 2017 $85.54 1.63% 2,673.61 0.98%
42. Jan 31, 2018 $95.01 11.07% 2,823.81 5.62%
43. Feb 28, 2018 $93.77 $0.42 -0.86% 2,713.83 -3.89%
44. Mar 31, 2018 $91.27 -2.67% 2,640.87 -2.69%
45. Apr 30, 2018 $93.52 2.47% 2,648.05 0.27%
46. May 31, 2018 $98.84 $0.42 6.14% 2,705.27 2.16%
47. Jun 30, 2018 $98.61 -0.23% 2,718.37 0.48%
48. Jul 31, 2018 $106.08 7.58% 2,816.29 3.60%
49. Aug 31, 2018 $112.33 $0.42 6.29% 2,901.52 3.03%
50. Sep 30, 2018 $114.37 1.82% 2,913.98 0.43%
51. Oct 31, 2018 $106.81 -6.61% 2,711.74 -6.94%
52. Nov 30, 2018 $110.89 $0.46 4.25% 2,760.17 1.79%
53. Dec 31, 2018 $101.57 -8.40% 2,506.85 -9.18%
54. Jan 31, 2019 $104.43 2.82% 2,704.10 7.87%
55. Feb 28, 2019 $112.03 $0.46 7.72% 2,784.49 2.97%
56. Mar 31, 2019 $117.94 5.28% 2,834.40 1.79%
57. Apr 30, 2019 $130.60 10.73% 2,945.83 3.93%
58. May 31, 2019 $123.68 $0.46 -4.95% 2,752.06 -6.58%
59. Jun 30, 2019 $133.96 8.31% 2,941.76 6.89%
60. Jul 31, 2019 $136.27 1.72% 2,980.38 1.31%
61. Aug 31, 2019 $137.86 $0.46 1.50% 2,926.46 -1.81%
62. Sep 30, 2019 $139.03 0.85% 2,976.74 1.72%
63. Oct 31, 2019 $143.37 3.12% 3,037.56 2.04%
64. Nov 30, 2019 $151.38 $0.51 5.94% 3,140.98 3.40%
65. Dec 31, 2019 $157.70 4.17% 3,230.78 2.86%
66. Jan 31, 2020 $170.23 7.95% 3,225.52 -0.16%
67. Feb 29, 2020 $162.01 $0.51 -4.53% 2,954.22 -8.41%
68. Mar 31, 2020 $157.71 -2.65% 2,584.59 -12.51%
69. Apr 30, 2020 $179.21 13.63% 2,912.43 12.68%
70. May 31, 2020 $183.25 $0.51 2.54% 3,044.31 4.53%
71. Jun 30, 2020 $203.51 11.06% 3,100.29 1.84%
Average (R): 2.57% 0.75%
Standard deviation: 6.12% 4.04%

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 MSFT during period t

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


Variance and Covariance

Microsoft Corp., calculation of variance and covariance of returns

Microsoft Excel LibreOffice Calc
t Date RMSFT,t RS&P 500,t (RMSFT,tRMSFT)2 (RS&P 500,tRS&P 500)2 (RMSFT,tRMSFT)×(RS&P 500,tRS&P 500)
1. Aug 31, 2014 5.91% 3.77% 11.16 9.09 10.07
2. Sep 30, 2014 2.05% -1.55% 0.27 5.30 1.20
3. Oct 31, 2014 1.27% 2.32% 1.68 2.46 -2.03
. . . . . . .
. . . . . . .
. . . . . . .
70. May 31, 2020 2.54% 4.53% 0.00 14.27 -0.11
71. Jun 30, 2020 11.06% 1.84% 72.04 1.18 9.24
Total (Σ): 2,617.76 1,144.26 1,150.98
t Date RMSFT,t RS&P 500,t (RMSFT,tRMSFT)2 (RS&P 500,tRS&P 500)2 (RMSFT,tRMSFT)×(RS&P 500,tRS&P 500)
1. Aug 31, 2014 5.91% 3.77% 11.16 9.09 10.07
2. Sep 30, 2014 2.05% -1.55% 0.27 5.30 1.20
3. Oct 31, 2014 1.27% 2.32% 1.68 2.46 -2.03
4. Nov 30, 2014 2.49% 2.45% 0.01 2.90 -0.13
5. Dec 31, 2014 -2.84% -0.42% 29.30 1.37 6.33
6. Jan 31, 2015 -13.02% -3.10% 243.14 14.86 60.11
7. Feb 28, 2015 9.31% 5.49% 45.41 22.45 31.93
8. Mar 31, 2015 -7.27% -1.74% 96.89 6.20 24.51
9. Apr 30, 2015 19.63% 0.85% 290.97 0.01 1.73
10. May 31, 2015 -3.02% 1.05% 31.25 0.09 -1.67
11. Jun 30, 2015 -5.78% -2.10% 69.75 8.13 23.82
12. Jul 31, 2015 5.78% 1.97% 10.29 1.50 3.92
13. Aug 31, 2015 -6.15% -6.26% 75.93 49.12 61.07
14. Sep 30, 2015 1.70% -2.64% 0.75 11.53 2.95
15. Oct 31, 2015 18.93% 8.30% 267.82 56.97 123.52
16. Nov 30, 2015 3.93% 0.05% 1.86 0.49 -0.96
17. Dec 31, 2015 2.08% -1.75% 0.24 6.27 1.22
18. Jan 31, 2016 -0.70% -5.07% 10.70 33.92 19.05
19. Feb 29, 2016 -6.99% -0.41% 91.33 1.35 11.12
20. Mar 31, 2016 8.55% 6.60% 35.77 34.20 34.98
21. Apr 30, 2016 -9.70% 0.27% 150.63 0.23 5.90
22. May 31, 2016 7.00% 1.53% 19.62 0.61 3.46
23. Jun 30, 2016 -3.45% 0.09% 36.25 0.44 3.97
24. Jul 31, 2016 10.77% 3.56% 67.24 7.90 23.04
25. Aug 31, 2016 2.01% -0.12% 0.31 0.76 0.49
26. Sep 30, 2016 0.24% -0.12% 5.40 0.76 2.03
27. Oct 31, 2016 4.03% -1.94% 2.13 7.25 -3.93
28. Nov 30, 2016 1.22% 3.42% 1.82 7.11 -3.60
29. Dec 31, 2016 3.12% 1.82% 0.30 1.14 0.59
30. Jan 31, 2017 4.04% 1.79% 2.16 1.08 1.53
31. Feb 28, 2017 -0.43% 3.72% 9.01 8.82 -8.91
32. Mar 31, 2017 2.94% -0.04% 0.14 0.62 -0.29
33. Apr 30, 2017 3.95% 0.91% 1.90 0.03 0.22
34. May 31, 2017 2.59% 1.16% 0.00 0.17 0.01
35. Jun 30, 2017 -1.30% 0.48% 14.99 0.07 1.04
36. Jul 31, 2017 5.47% 1.93% 8.42 1.40 3.44
37. Aug 31, 2017 3.38% 0.05% 0.66 0.48 -0.57
38. Sep 30, 2017 -0.37% 1.93% 8.66 1.39 -3.47
39. Oct 31, 2017 11.67% 2.22% 82.77 2.16 13.36
40. Nov 30, 2017 1.70% 2.81% 0.76 4.23 -1.80
41. Dec 31, 2017 1.63% 0.98% 0.88 0.05 -0.22
42. Jan 31, 2018 11.07% 5.62% 72.29 23.69 41.38
43. Feb 28, 2018 -0.86% -3.89% 11.77 21.58 15.94
44. Mar 31, 2018 -2.67% -2.69% 27.40 11.83 18.00
45. Apr 30, 2018 2.47% 0.27% 0.01 0.23 0.05
46. May 31, 2018 6.14% 2.16% 12.74 1.99 5.03
47. Jun 30, 2018 -0.23% 0.48% 7.85 0.07 0.75
48. Jul 31, 2018 7.58% 3.60% 25.07 8.13 14.28
49. Aug 31, 2018 6.29% 3.03% 13.83 5.18 8.46
50. Sep 30, 2018 1.82% 0.43% 0.57 0.10 0.24
51. Oct 31, 2018 -6.61% -6.94% 84.24 59.15 70.59
52. Nov 30, 2018 4.25% 1.79% 2.83 1.07 1.74
53. Dec 31, 2018 -8.40% -9.18% 120.41 98.57 108.94
54. Jan 31, 2019 2.82% 7.87% 0.06 50.66 1.76
55. Feb 28, 2019 7.72% 2.97% 26.52 4.94 11.44
56. Mar 31, 2019 5.28% 1.79% 7.33 1.09 2.82
57. Apr 30, 2019 10.73% 3.93% 66.68 10.12 25.97
58. May 31, 2019 -4.95% -6.58% 56.47 53.71 55.07
59. Jun 30, 2019 8.31% 6.89% 32.99 37.73 35.28
60. Jul 31, 2019 1.72% 1.31% 0.71 0.32 -0.47
61. Aug 31, 2019 1.50% -1.81% 1.13 6.55 2.72
62. Sep 30, 2019 0.85% 1.72% 2.96 0.94 -1.66
63. Oct 31, 2019 3.12% 2.04% 0.31 1.67 0.72
64. Nov 30, 2019 5.94% 3.40% 11.39 7.04 8.96
65. Dec 31, 2019 4.17% 2.86% 2.58 4.44 3.39
66. Jan 31, 2020 7.95% -0.16% 28.91 0.83 -4.91
67. Feb 29, 2020 -4.53% -8.41% 50.37 83.94 65.03
68. Mar 31, 2020 -2.65% -12.51% 27.27 175.90 69.26
69. Apr 30, 2020 13.63% 12.68% 122.42 142.41 132.04
70. May 31, 2020 2.54% 4.53% 0.00 14.27 -0.11
71. Jun 30, 2020 11.06% 1.84% 72.04 1.18 9.24
Total (Σ): 2,617.76 1,144.26 1,150.98

Show all

VarianceMSFT = Σ(RMSFT,tRMSFT)2 ÷ (71 – 1)
= 2,617.76 ÷ (71 – 1)
= 37.40

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (71 – 1)
= 1,144.26 ÷ (71 – 1)
= 16.35

CovarianceMSFT, S&P 500 = Σ(RMSFT,tRMSFT)×(RS&P 500,tRS&P 500) ÷ (71 – 1)
= 1,150.98 ÷ (71 – 1)
= 16.44


Systematic Risk (β) Estimation

Microsoft Excel LibreOffice Calc
VarianceMSFT 37.40
VarianceS&P 500 16.35
CovarianceMSFT, S&P 500 16.44
Correlation coefficientMSFT, S&P 5001 0.67
βMSFT2 1.01
αMSFT3 1.81%

Calculations

1 Correlation coefficientMSFT, S&P 500
= CovarianceMSFT, S&P 500 ÷ (Standard deviationMSFT × Standard deviationS&P 500)
= 16.44 ÷ (6.12% × 4.04%)
= 0.67

2 βMSFT
= CovarianceMSFT, S&P 500 ÷ VarianceS&P 500
= 16.44 ÷ 16.35
= 1.01

3 αMSFT
= AverageMSFT – βMSFT × AverageS&P 500
= 2.57%1.01 × 0.75%
= 1.81%


Expected Rate of Return

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF 2.08%
Expected rate of return on market portfolio2 E(RM) 12.39%
Systematic risk (β) of Microsoft Corp.’s common stock βMSFT 1.01
 
Expected rate of return on Microsoft Corp.’s common stock3 E(RMSFT) 12.45%

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).

2 See details »

3 E(RMSFT) = RF + βMSFT [E(RM) – RF]
= 2.08% + 1.01 [12.39%2.08%]
= 12.45%