Microsoft Excel LibreOffice Calc

Ford Motor Co. (F)


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 Ford Motor Co.’s common stock.


Rates of Return

Ford Motor Co., monthly rates of return

Microsoft Excel LibreOffice Calc
Ford Motor Co. (F) Standard & Poor’s 500 (S&P 500)
t Date PriceF,t1 DividendF,t1 RF,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2014 14.96 1,782.59
1. Feb 28, 2014 15.39 2.87% 1,859.45 4.31%
2. Mar 31, 2014 15.60 1.36% 1,872.34 0.69%
3. Apr 30, 2014 16.15 0.125 4.33% 1,883.95 0.62%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2018 9.41 -1.47% 2,760.17 1.79%
59. Dec 31, 2018 7.65 -18.70% 2,506.85 -9.18%
Average: -0.54% 0.63%
Standard Deviation: 5.69% 3.13%
Ford Motor Co. (F) Standard & Poor’s 500 (S&P 500)
t Date PriceF,t1 DividendF,t1 RF,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2014 14.96 1,782.59
1. Feb 28, 2014 15.39 2.87% 1,859.45 4.31%
2. Mar 31, 2014 15.60 1.36% 1,872.34 0.69%
3. Apr 30, 2014 16.15 0.125 4.33% 1,883.95 0.62%
4. May 31, 2014 16.44 1.80% 1,923.57 2.10%
5. Jun 30, 2014 17.24 4.87% 1,960.23 1.91%
6. Jul 31, 2014 17.02 0.125 -0.55% 1,930.67 -1.51%
7. Aug 31, 2014 17.41 2.29% 2,003.37 3.77%
8. Sep 30, 2014 14.79 -15.05% 1,972.29 -1.55%
9. Oct 31, 2014 14.09 0.125 -3.89% 2,018.05 2.32%
10. Nov 30, 2014 15.73 11.64% 2,067.56 2.45%
11. Dec 31, 2014 15.50 -1.46% 2,058.90 -0.42%
12. Jan 31, 2015 14.71 0.15 -4.13% 1,994.99 -3.10%
13. Feb 28, 2015 16.34 11.08% 2,104.50 5.49%
14. Mar 31, 2015 16.14 -1.22% 2,067.89 -1.74%
15. Apr 30, 2015 15.80 0.15 -1.18% 2,085.51 0.85%
16. May 31, 2015 15.17 -3.99% 2,107.39 1.05%
17. Jun 30, 2015 15.01 -1.05% 2,063.11 -2.10%
18. Jul 31, 2015 14.83 0.15 -0.20% 2,103.84 1.97%
19. Aug 31, 2015 13.87 -6.47% 1,972.18 -6.26%
20. Sep 30, 2015 13.57 -2.16% 1,920.03 -2.64%
21. Oct 31, 2015 14.81 0.15 10.24% 2,079.36 8.30%
22. Nov 30, 2015 14.33 -3.24% 2,080.41 0.05%
23. Dec 31, 2015 14.09 -1.67% 2,043.94 -1.75%
24. Jan 31, 2016 11.94 0.40 -12.42% 1,940.24 -5.07%
25. Feb 29, 2016 12.51 4.77% 1,932.23 -0.41%
26. Mar 31, 2016 13.50 7.91% 2,059.74 6.60%
27. Apr 30, 2016 13.56 0.15 1.56% 2,065.30 0.27%
28. May 31, 2016 13.49 -0.52% 2,096.95 1.53%
29. Jun 30, 2016 12.57 -6.82% 2,098.86 0.09%
30. Jul 31, 2016 12.66 0.15 1.91% 2,173.60 3.56%
31. Aug 31, 2016 12.60 -0.47% 2,170.95 -0.12%
32. Sep 30, 2016 12.07 -4.21% 2,168.27 -0.12%
33. Oct 31, 2016 11.74 0.15 -1.49% 2,126.15 -1.94%
34. Nov 30, 2016 11.96 1.87% 2,198.81 3.42%
35. Dec 31, 2016 12.13 1.42% 2,238.83 1.82%
36. Jan 31, 2017 12.36 0.20 3.54% 2,278.87 1.79%
37. Feb 28, 2017 12.53 1.38% 2,363.64 3.72%
38. Mar 31, 2017 11.64 -7.10% 2,362.72 -0.04%
39. Apr 30, 2017 11.47 0.15 -0.17% 2,384.20 0.91%
40. May 31, 2017 11.12 -3.05% 2,411.80 1.16%
41. Jun 30, 2017 11.19 0.63% 2,423.41 0.48%
42. Jul 31, 2017 11.22 0.15 1.61% 2,470.30 1.93%
43. Aug 31, 2017 11.03 -1.69% 2,471.65 0.05%
44. Sep 30, 2017 11.97 8.52% 2,519.36 1.93%
45. Oct 31, 2017 12.27 0.15 3.76% 2,575.26 2.22%
46. Nov 30, 2017 12.52 2.04% 2,647.58 2.81%
47. Dec 31, 2017 12.49 -0.24% 2,673.61 0.98%
48. Jan 31, 2018 10.97 0.28 -9.93% 2,823.81 5.62%
49. Feb 28, 2018 10.61 -3.28% 2,713.83 -3.89%
50. Mar 31, 2018 11.08 4.43% 2,640.87 -2.69%
51. Apr 30, 2018 11.24 0.15 2.80% 2,648.05 0.27%
52. May 31, 2018 11.55 2.76% 2,705.27 2.16%
53. Jun 30, 2018 11.07 -4.16% 2,718.37 0.48%
54. Jul 31, 2018 10.04 0.15 -7.95% 2,816.29 3.60%
55. Aug 31, 2018 9.48 -5.58% 2,901.52 3.03%
56. Sep 30, 2018 9.25 -2.43% 2,913.98 0.43%
57. Oct 31, 2018 9.55 0.15 4.86% 2,711.74 -6.94%
58. Nov 30, 2018 9.41 -1.47% 2,760.17 1.79%
59. Dec 31, 2018 7.65 -18.70% 2,506.85 -9.18%
Average: -0.54% 0.63%
Standard Deviation: 5.69% 3.13%

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 F during period t

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


Systematic Risk (β) Estimation

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VarianceF 32.32
VarianceS&P 500 9.77
CovarianceF, S&P 500 8.97
Correlation CoefficientF, S&P 5001 0.50
βF2 0.92
αF3 -1.11

Calculations

1 CovarianceF, S&P 500 ÷ (Standard DeviationF × Standard DeviationS&P 500)
= 8.97 ÷ (5.69 × 3.13)

2 CovarianceF, S&P 500 ÷ VarianceS&P 500
= 8.97 ÷ 9.77

3 AverageF – βF × AverageS&P 500
= -0.540.92 × 0.63


Expected Rate of Return

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Assumptions
Rate of return on LT Treasury Composite1 RF 2.45%
Expected rate of return on market portfolio2 E(RM) 11.79%
Systematic risk (β) of Ford Motor Co.’s common stock βF 0.92
Expected rate of return on Ford Motor Co.’s common stock3 E(RF) 11.02%

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(RF) = RF + βF [E(RM) – RF]
= 2.45% + 0.92 [11.79%2.45%]
= 11.02%