Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like FedEx Corp. common stock.
Rates of Return
FedEx Corp. (FDX) | Standard & Poor’s 500 (S&P 500) | |||||
---|---|---|---|---|---|---|
t | Date | PriceFDX,t1 | DividendFDX,t1 | RFDX,t2 | PriceS&P 500,t | RS&P 500,t3 |
Jun 30, 2017 | $217.33 | 2,423.41 | ||||
1. | Jul 31, 2017 | $208.03 | -4.28% | 2,470.30 | 1.93% | |
2. | Aug 31, 2017 | $214.38 | 3.05% | 2,471.65 | 0.05% | |
3. | Sep 30, 2017 | $225.58 | $0.50 | 5.46% | 2,519.36 | 1.93% |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
70. | Apr 30, 2023 | $227.78 | -0.31% | 4,169.48 | 1.46% | |
71. | May 31, 2023 | $217.98 | -4.30% | 4,179.83 | 0.25% | |
Average (R): | 0.64% | 0.90% | ||||
Standard deviation: | 10.06% | 5.03% |
FedEx Corp. (FDX) | Standard & Poor’s 500 (S&P 500) | |||||
---|---|---|---|---|---|---|
t | Date | PriceFDX,t1 | DividendFDX,t1 | RFDX,t2 | PriceS&P 500,t | RS&P 500,t3 |
Jun 30, 2017 | $217.33 | 2,423.41 | ||||
1. | Jul 31, 2017 | $208.03 | -4.28% | 2,470.30 | 1.93% | |
2. | Aug 31, 2017 | $214.38 | 3.05% | 2,471.65 | 0.05% | |
3. | Sep 30, 2017 | $225.58 | $0.50 | 5.46% | 2,519.36 | 1.93% |
4. | Oct 31, 2017 | $225.81 | 0.10% | 2,575.26 | 2.22% | |
5. | Nov 30, 2017 | $231.46 | 2.50% | 2,647.58 | 2.81% | |
6. | Dec 31, 2017 | $249.54 | $0.50 | 8.03% | 2,673.61 | 0.98% |
7. | Jan 31, 2018 | $262.48 | 5.19% | 2,823.81 | 5.62% | |
8. | Feb 28, 2018 | $246.41 | -6.12% | 2,713.83 | -3.89% | |
9. | Mar 31, 2018 | $240.11 | $0.50 | -2.35% | 2,640.87 | -2.69% |
10. | Apr 30, 2018 | $247.20 | 2.95% | 2,648.05 | 0.27% | |
11. | May 31, 2018 | $249.12 | 0.78% | 2,705.27 | 2.16% | |
12. | Jun 30, 2018 | $227.06 | $0.65 | -8.59% | 2,718.37 | 0.48% |
13. | Jul 31, 2018 | $245.87 | 8.28% | 2,816.29 | 3.60% | |
14. | Aug 31, 2018 | $243.95 | -0.78% | 2,901.52 | 3.03% | |
15. | Sep 30, 2018 | $240.79 | $0.65 | -1.03% | 2,913.98 | 0.43% |
16. | Oct 31, 2018 | $220.34 | -8.49% | 2,711.74 | -6.94% | |
17. | Nov 30, 2018 | $229.00 | 3.93% | 2,760.17 | 1.79% | |
18. | Dec 31, 2018 | $161.33 | $0.65 | -29.27% | 2,506.85 | -9.18% |
19. | Jan 31, 2019 | $177.57 | 10.07% | 2,704.10 | 7.87% | |
20. | Feb 28, 2019 | $181.00 | 1.93% | 2,784.49 | 2.97% | |
21. | Mar 31, 2019 | $181.41 | $0.65 | 0.59% | 2,834.40 | 1.79% |
22. | Apr 30, 2019 | $189.46 | 4.44% | 2,945.83 | 3.93% | |
23. | May 31, 2019 | $154.28 | -18.57% | 2,752.06 | -6.58% | |
24. | Jun 30, 2019 | $164.19 | $0.65 | 6.84% | 2,941.76 | 6.89% |
25. | Jul 31, 2019 | $170.53 | 3.86% | 2,980.38 | 1.31% | |
26. | Aug 31, 2019 | $158.61 | -6.99% | 2,926.46 | -1.81% | |
27. | Sep 30, 2019 | $145.57 | $0.65 | -7.81% | 2,976.74 | 1.72% |
28. | Oct 31, 2019 | $152.66 | 4.87% | 3,037.56 | 2.04% | |
29. | Nov 30, 2019 | $160.05 | 4.84% | 3,140.98 | 3.40% | |
30. | Dec 31, 2019 | $151.21 | $0.65 | -5.12% | 3,230.78 | 2.86% |
31. | Jan 31, 2020 | $144.64 | -4.34% | 3,225.52 | -0.16% | |
32. | Feb 29, 2020 | $141.17 | -2.40% | 2,954.22 | -8.41% | |
33. | Mar 31, 2020 | $121.26 | $0.65 | -13.64% | 2,584.59 | -12.51% |
34. | Apr 30, 2020 | $126.77 | 4.54% | 2,912.43 | 12.68% | |
35. | May 31, 2020 | $130.56 | 2.99% | 3,044.31 | 4.53% | |
36. | Jun 30, 2020 | $140.22 | $0.65 | 7.90% | 3,100.29 | 1.84% |
37. | Jul 31, 2020 | $168.40 | 20.10% | 3,271.12 | 5.51% | |
38. | Aug 31, 2020 | $219.84 | 30.55% | 3,500.31 | 7.01% | |
39. | Sep 30, 2020 | $251.52 | $0.65 | 14.71% | 3,363.00 | -3.92% |
40. | Oct 31, 2020 | $259.47 | 3.16% | 3,269.96 | -2.77% | |
41. | Nov 30, 2020 | $286.58 | 10.45% | 3,621.63 | 10.75% | |
42. | Dec 31, 2020 | $259.62 | $0.65 | -9.18% | 3,756.07 | 3.71% |
43. | Jan 31, 2021 | $235.34 | -9.35% | 3,714.24 | -1.11% | |
44. | Feb 28, 2021 | $254.50 | 8.14% | 3,811.15 | 2.61% | |
45. | Mar 31, 2021 | $284.04 | $0.65 | 11.86% | 3,972.89 | 4.24% |
46. | Apr 30, 2021 | $290.31 | 2.21% | 4,181.17 | 5.24% | |
47. | May 31, 2021 | $314.81 | 8.44% | 4,204.11 | 0.55% | |
48. | Jun 30, 2021 | $298.33 | $0.75 | -5.00% | 4,297.50 | 2.22% |
49. | Jul 31, 2021 | $279.95 | -6.16% | 4,395.26 | 2.27% | |
50. | Aug 31, 2021 | $265.69 | -5.09% | 4,522.68 | 2.90% | |
51. | Sep 30, 2021 | $219.29 | $0.75 | -17.18% | 4,307.54 | -4.76% |
52. | Oct 31, 2021 | $235.53 | 7.41% | 4,605.38 | 6.91% | |
53. | Nov 30, 2021 | $230.37 | -2.19% | 4,567.00 | -0.83% | |
54. | Dec 31, 2021 | $258.64 | $0.75 | 12.60% | 4,766.18 | 4.36% |
55. | Jan 31, 2022 | $245.86 | -4.94% | 4,515.55 | -5.26% | |
56. | Feb 28, 2022 | $222.27 | -9.59% | 4,373.94 | -3.14% | |
57. | Mar 31, 2022 | $231.39 | $0.75 | 4.44% | 4,530.41 | 3.58% |
58. | Apr 30, 2022 | $198.74 | -14.11% | 4,131.93 | -8.80% | |
59. | May 31, 2022 | $224.58 | 13.00% | 4,132.15 | 0.01% | |
60. | Jun 30, 2022 | $226.71 | $1.15 | 1.46% | 3,785.38 | -8.39% |
61. | Jul 31, 2022 | $233.09 | 2.81% | 4,130.29 | 9.11% | |
62. | Aug 31, 2022 | $210.81 | -9.56% | 3,955.00 | -4.24% | |
63. | Sep 30, 2022 | $148.47 | $1.15 | -29.03% | 3,585.62 | -9.34% |
64. | Oct 31, 2022 | $160.28 | 7.95% | 3,871.98 | 7.99% | |
65. | Nov 30, 2022 | $182.22 | 13.69% | 4,080.11 | 5.38% | |
66. | Dec 31, 2022 | $173.20 | $1.15 | -4.32% | 3,839.50 | -5.90% |
67. | Jan 31, 2023 | $193.86 | 11.93% | 4,076.60 | 6.18% | |
68. | Feb 28, 2023 | $203.22 | 4.83% | 3,970.15 | -2.61% | |
69. | Mar 31, 2023 | $228.49 | $1.15 | 13.00% | 4,109.31 | 3.51% |
70. | Apr 30, 2023 | $227.78 | -0.31% | 4,169.48 | 1.46% | |
71. | May 31, 2023 | $217.98 | -4.30% | 4,179.83 | 0.25% | |
Average (R): | 0.64% | 0.90% | ||||
Standard deviation: | 10.06% | 5.03% |
Show all
1 Data in US$ per share of common stock, adjusted for splits and stock dividends.
2 Rate of return on common stock of FDX during period t
3 Rate of return on S&P 500 (the market portfolio proxy) during period t
Variance and Covariance
t | Date | RFDX,t | RS&P 500,t | (RFDX,t–RFDX)2 | (RS&P 500,t–RS&P 500)2 | (RFDX,t–RFDX)×(RS&P 500,t–RS&P 500) |
---|---|---|---|---|---|---|
1. | Jul 31, 2017 | -4.28% | 1.93% | 24.24 | 1.08 | -5.11 |
2. | Aug 31, 2017 | 3.05% | 0.05% | 5.80 | 0.71 | -2.03 |
3. | Sep 30, 2017 | 5.46% | 1.93% | 23.17 | 1.07 | 4.98 |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
70. | Apr 30, 2023 | -0.31% | 1.46% | 0.91 | 0.32 | -0.54 |
71. | May 31, 2023 | -4.30% | 0.25% | 24.47 | 0.42 | 3.21 |
Total (Σ): | 7,084.17 | 1,772.87 | 2,335.40 |
t | Date | RFDX,t | RS&P 500,t | (RFDX,t–RFDX)2 | (RS&P 500,t–RS&P 500)2 | (RFDX,t–RFDX)×(RS&P 500,t–RS&P 500) |
---|---|---|---|---|---|---|
1. | Jul 31, 2017 | -4.28% | 1.93% | 24.24 | 1.08 | -5.11 |
2. | Aug 31, 2017 | 3.05% | 0.05% | 5.80 | 0.71 | -2.03 |
3. | Sep 30, 2017 | 5.46% | 1.93% | 23.17 | 1.07 | 4.98 |
4. | Oct 31, 2017 | 0.10% | 2.22% | 0.29 | 1.75 | -0.72 |
5. | Nov 30, 2017 | 2.50% | 2.81% | 3.45 | 3.65 | 3.55 |
6. | Dec 31, 2017 | 8.03% | 0.98% | 54.51 | 0.01 | 0.64 |
7. | Jan 31, 2018 | 5.19% | 5.62% | 20.62 | 22.29 | 21.44 |
8. | Feb 28, 2018 | -6.12% | -3.89% | 45.79 | 22.96 | 32.42 |
9. | Mar 31, 2018 | -2.35% | -2.69% | 8.99 | 12.85 | 10.75 |
10. | Apr 30, 2018 | 2.95% | 0.27% | 5.33 | 0.39 | -1.44 |
11. | May 31, 2018 | 0.78% | 2.16% | 0.02 | 1.60 | 0.17 |
12. | Jun 30, 2018 | -8.59% | 0.48% | 85.35 | 0.17 | 3.81 |
13. | Jul 31, 2018 | 8.28% | 3.60% | 58.37 | 7.32 | 20.67 |
14. | Aug 31, 2018 | -0.78% | 3.03% | 2.03 | 4.54 | -3.04 |
15. | Sep 30, 2018 | -1.03% | 0.43% | 2.80 | 0.22 | 0.78 |
16. | Oct 31, 2018 | -8.49% | -6.94% | 83.49 | 61.42 | 71.61 |
17. | Nov 30, 2018 | 3.93% | 1.79% | 10.80 | 0.79 | 2.92 |
18. | Dec 31, 2018 | -29.27% | -9.18% | 894.66 | 101.49 | 301.33 |
19. | Jan 31, 2019 | 10.07% | 7.87% | 88.77 | 48.61 | 65.69 |
20. | Feb 28, 2019 | 1.93% | 2.97% | 1.66 | 4.31 | 2.67 |
21. | Mar 31, 2019 | 0.59% | 1.79% | 0.00 | 0.80 | -0.05 |
22. | Apr 30, 2019 | 4.44% | 3.93% | 14.39 | 9.21 | 11.51 |
23. | May 31, 2019 | -18.57% | -6.58% | 369.14 | 55.87 | 143.61 |
24. | Jun 30, 2019 | 6.84% | 6.89% | 38.44 | 35.96 | 37.18 |
25. | Jul 31, 2019 | 3.86% | 1.31% | 10.35 | 0.17 | 1.34 |
26. | Aug 31, 2019 | -6.99% | -1.81% | 58.28 | 7.32 | 20.66 |
27. | Sep 30, 2019 | -7.81% | 1.72% | 71.51 | 0.67 | -6.95 |
28. | Oct 31, 2019 | 4.87% | 2.04% | 17.86 | 1.31 | 4.85 |
29. | Nov 30, 2019 | 4.84% | 3.40% | 17.61 | 6.29 | 10.52 |
30. | Dec 31, 2019 | -5.12% | 2.86% | 33.20 | 3.85 | -11.31 |
31. | Jan 31, 2020 | -4.34% | -0.16% | 24.89 | 1.12 | 5.29 |
32. | Feb 29, 2020 | -2.40% | -8.41% | 9.26 | 86.63 | 28.33 |
33. | Mar 31, 2020 | -13.64% | -12.51% | 204.13 | 179.79 | 191.58 |
34. | Apr 30, 2020 | 4.54% | 12.68% | 15.21 | 138.95 | 45.97 |
35. | May 31, 2020 | 2.99% | 4.53% | 5.50 | 13.19 | 8.52 |
36. | Jun 30, 2020 | 7.90% | 1.84% | 52.60 | 0.89 | 6.83 |
37. | Jul 31, 2020 | 20.10% | 5.51% | 378.40 | 21.28 | 89.74 |
38. | Aug 31, 2020 | 30.55% | 7.01% | 894.12 | 37.33 | 182.70 |
39. | Sep 30, 2020 | 14.71% | -3.92% | 197.73 | 23.23 | -67.77 |
40. | Oct 31, 2020 | 3.16% | -2.77% | 6.33 | 13.42 | -9.22 |
41. | Nov 30, 2020 | 10.45% | 10.75% | 96.11 | 97.18 | 96.64 |
42. | Dec 31, 2020 | -9.18% | 3.71% | 96.53 | 7.93 | -27.66 |
43. | Jan 31, 2021 | -9.35% | -1.11% | 99.93 | 4.04 | 20.10 |
44. | Feb 28, 2021 | 8.14% | 2.61% | 56.20 | 2.93 | 12.84 |
45. | Mar 31, 2021 | 11.86% | 4.24% | 125.84 | 11.20 | 37.55 |
46. | Apr 30, 2021 | 2.21% | 5.24% | 2.44 | 18.89 | 6.79 |
47. | May 31, 2021 | 8.44% | 0.55% | 60.76 | 0.12 | -2.71 |
48. | Jun 30, 2021 | -5.00% | 2.22% | 31.82 | 1.75 | -7.47 |
49. | Jul 31, 2021 | -6.16% | 2.27% | 46.31 | 1.90 | -9.38 |
50. | Aug 31, 2021 | -5.09% | 2.90% | 32.93 | 4.01 | -11.49 |
51. | Sep 30, 2021 | -17.18% | -4.76% | 317.77 | 31.96 | 100.78 |
52. | Oct 31, 2021 | 7.41% | 6.91% | 45.71 | 36.21 | 40.69 |
53. | Nov 30, 2021 | -2.19% | -0.83% | 8.04 | 2.99 | 4.91 |
54. | Dec 31, 2021 | 12.60% | 4.36% | 142.87 | 12.00 | 41.41 |
55. | Jan 31, 2022 | -4.94% | -5.26% | 31.20 | 37.89 | 34.38 |
56. | Feb 28, 2022 | -9.59% | -3.14% | 104.84 | 16.26 | 41.29 |
57. | Mar 31, 2022 | 4.44% | 3.58% | 14.41 | 7.19 | 10.18 |
58. | Apr 30, 2022 | -14.11% | -8.80% | 217.70 | 93.94 | 143.01 |
59. | May 31, 2022 | 13.00% | 0.01% | 152.71 | 0.79 | -11.01 |
60. | Jun 30, 2022 | 1.46% | -8.39% | 0.67 | 86.28 | -7.58 |
61. | Jul 31, 2022 | 2.81% | 9.11% | 4.71 | 67.49 | 17.82 |
62. | Aug 31, 2022 | -9.56% | -4.24% | 104.10 | 26.43 | 52.45 |
63. | Sep 30, 2022 | -29.03% | -9.34% | 880.34 | 104.78 | 303.71 |
64. | Oct 31, 2022 | 7.95% | 7.99% | 53.44 | 50.26 | 51.83 |
65. | Nov 30, 2022 | 13.69% | 5.38% | 170.15 | 20.06 | 58.42 |
66. | Dec 31, 2022 | -4.32% | -5.90% | 24.64 | 46.16 | 33.72 |
67. | Jan 31, 2023 | 11.93% | 6.18% | 127.33 | 27.86 | 59.56 |
68. | Feb 28, 2023 | 4.83% | -2.61% | 17.50 | 12.31 | -14.68 |
69. | Mar 31, 2023 | 13.00% | 3.51% | 152.68 | 6.80 | 32.23 |
70. | Apr 30, 2023 | -0.31% | 1.46% | 0.91 | 0.32 | -0.54 |
71. | May 31, 2023 | -4.30% | 0.25% | 24.47 | 0.42 | 3.21 |
Total (Σ): | 7,084.17 | 1,772.87 | 2,335.40 |
Show all
VarianceFDX = Σ(RFDX,t–RFDX)2 ÷ (71 – 1)
= 7,084.17 ÷ (71 – 1)
= 101.20
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= 1,772.87 ÷ (71 – 1)
= 25.33
CovarianceFDX, S&P 500 = Σ(RFDX,t–RFDX)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= 2,335.40 ÷ (71 – 1)
= 33.36
Systematic Risk (β) Estimation
VarianceFDX | 101.20 |
VarianceS&P 500 | 25.33 |
CovarianceFDX, S&P 500 | 33.36 |
Correlation coefficientFDX, S&P 5001 | 0.66 |
βFDX2 | 1.32 |
αFDX3 | -0.54% |
Calculations
1 Correlation coefficientFDX, S&P 500
= CovarianceFDX, S&P 500 ÷ (Standard deviationFDX × Standard deviationS&P 500)
= 33.36 ÷ (10.06% × 5.03%)
= 0.66
2 βFDX
= CovarianceFDX, S&P 500 ÷ VarianceS&P 500
= 33.36 ÷ 25.33
= 1.32
3 αFDX
= AverageFDX – βFDX × AverageS&P 500
= 0.64% – 1.32 × 0.90%
= -0.54%
Expected Rate of Return
Assumptions | ||
Rate of return on LT Treasury Composite1 | RF | 4.86% |
Expected rate of return on market portfolio2 | E(RM) | 13.52% |
Systematic risk (β) of FedEx Corp. common stock | βFDX | 1.32 |
Expected rate of return on FedEx Corp. common stock3 | E(RFDX) | 16.27% |
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(RFDX) = RF + βFDX [E(RM) – RF]
= 4.86% + 1.32 [13.52% – 4.86%]
= 16.27%