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Capital Asset Pricing Model (CAPM)

Difficulty: Intermediate

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


Rates of Return

Accenture PLC, monthly rates of return

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

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 ACN during period t

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

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Systematic Risk (β) Estimation

 
VarianceACN
VarianceS&P 500
CovarianceACN, S&P 500
Correlation CoefficientACN, S&P 5001
βACN2
αACN3

Calculations

1 CovarianceACN, S&P 500 ÷ (Standard DeviationACN × Standard DeviationS&P 500)
= ÷ ( × )

2 CovarianceACN, S&P 500 ÷ VarianceS&P 500
= ÷

3 AverageACN – βACN × AverageS&P 500
= ×

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Expected Rate of Return

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

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(RACN) = RF + βACN [E(RM) – RF]
= % + [% – %]
= %

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