Stock Analysis on Net

Cisco Systems Inc. (NASDAQ:CSCO)

$24.99

Capital Asset Pricing Model (CAPM)

Microsoft Excel

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

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Rates of Return

Cisco Systems Inc., monthly rates of return

Microsoft Excel
Cisco Systems Inc. (CSCO) Standard & Poor’s 500 (S&P 500)
t Date PriceCSCO,t1 DividendCSCO,t1 RCSCO,t2 PriceS&P 500,t RS&P 500,t3
Aug 31, 2018
1. Sep 30, 2018
2. Oct 31, 2018
3. Nov 30, 2018
. . . . . . .
. . . . . . .
. . . . . . .
70. Jun 30, 2024
71. Jul 31, 2024
Average (R):
Standard deviation:
Cisco Systems Inc. (CSCO) Standard & Poor’s 500 (S&P 500)
t Date PriceCSCO,t1 DividendCSCO,t1 RCSCO,t2 PriceS&P 500,t RS&P 500,t3
Aug 31, 2018
1. Sep 30, 2018
2. Oct 31, 2018
3. Nov 30, 2018
4. Dec 31, 2018
5. Jan 31, 2019
6. Feb 28, 2019
7. Mar 31, 2019
8. Apr 30, 2019
9. May 31, 2019
10. Jun 30, 2019
11. Jul 31, 2019
12. Aug 31, 2019
13. Sep 30, 2019
14. Oct 31, 2019
15. Nov 30, 2019
16. Dec 31, 2019
17. Jan 31, 2020
18. Feb 29, 2020
19. Mar 31, 2020
20. Apr 30, 2020
21. May 31, 2020
22. Jun 30, 2020
23. Jul 31, 2020
24. Aug 31, 2020
25. Sep 30, 2020
26. Oct 31, 2020
27. Nov 30, 2020
28. Dec 31, 2020
29. Jan 31, 2021
30. Feb 28, 2021
31. Mar 31, 2021
32. Apr 30, 2021
33. May 31, 2021
34. Jun 30, 2021
35. Jul 31, 2021
36. Aug 31, 2021
37. Sep 30, 2021
38. Oct 31, 2021
39. Nov 30, 2021
40. Dec 31, 2021
41. Jan 31, 2022
42. Feb 28, 2022
43. Mar 31, 2022
44. Apr 30, 2022
45. May 31, 2022
46. Jun 30, 2022
47. Jul 31, 2022
48. Aug 31, 2022
49. Sep 30, 2022
50. Oct 31, 2022
51. Nov 30, 2022
52. Dec 31, 2022
53. Jan 31, 2023
54. Feb 28, 2023
55. Mar 31, 2023
56. Apr 30, 2023
57. May 31, 2023
58. Jun 30, 2023
59. Jul 31, 2023
60. Aug 31, 2023
61. Sep 30, 2023
62. Oct 31, 2023
63. Nov 30, 2023
64. Dec 31, 2023
65. Jan 31, 2024
66. Feb 29, 2024
67. Mar 31, 2024
68. Apr 30, 2024
69. May 31, 2024
70. Jun 30, 2024
71. Jul 31, 2024
Average (R):
Standard deviation:

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 CSCO during period t

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


Variance and Covariance

Cisco Systems Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RCSCO,t RS&P 500,t (RCSCO,tRCSCO)2 (RS&P 500,tRS&P 500)2 (RCSCO,tRCSCO)×(RS&P 500,tRS&P 500)
1. Sep 30, 2018
2. Oct 31, 2018
3. Nov 30, 2018
. . . . . . .
. . . . . . .
. . . . . . .
70. Jun 30, 2024
71. Jul 31, 2024
Total (Σ):
t Date RCSCO,t RS&P 500,t (RCSCO,tRCSCO)2 (RS&P 500,tRS&P 500)2 (RCSCO,tRCSCO)×(RS&P 500,tRS&P 500)
1. Sep 30, 2018
2. Oct 31, 2018
3. Nov 30, 2018
4. Dec 31, 2018
5. Jan 31, 2019
6. Feb 28, 2019
7. Mar 31, 2019
8. Apr 30, 2019
9. May 31, 2019
10. Jun 30, 2019
11. Jul 31, 2019
12. Aug 31, 2019
13. Sep 30, 2019
14. Oct 31, 2019
15. Nov 30, 2019
16. Dec 31, 2019
17. Jan 31, 2020
18. Feb 29, 2020
19. Mar 31, 2020
20. Apr 30, 2020
21. May 31, 2020
22. Jun 30, 2020
23. Jul 31, 2020
24. Aug 31, 2020
25. Sep 30, 2020
26. Oct 31, 2020
27. Nov 30, 2020
28. Dec 31, 2020
29. Jan 31, 2021
30. Feb 28, 2021
31. Mar 31, 2021
32. Apr 30, 2021
33. May 31, 2021
34. Jun 30, 2021
35. Jul 31, 2021
36. Aug 31, 2021
37. Sep 30, 2021
38. Oct 31, 2021
39. Nov 30, 2021
40. Dec 31, 2021
41. Jan 31, 2022
42. Feb 28, 2022
43. Mar 31, 2022
44. Apr 30, 2022
45. May 31, 2022
46. Jun 30, 2022
47. Jul 31, 2022
48. Aug 31, 2022
49. Sep 30, 2022
50. Oct 31, 2022
51. Nov 30, 2022
52. Dec 31, 2022
53. Jan 31, 2023
54. Feb 28, 2023
55. Mar 31, 2023
56. Apr 30, 2023
57. May 31, 2023
58. Jun 30, 2023
59. Jul 31, 2023
60. Aug 31, 2023
61. Sep 30, 2023
62. Oct 31, 2023
63. Nov 30, 2023
64. Dec 31, 2023
65. Jan 31, 2024
66. Feb 29, 2024
67. Mar 31, 2024
68. Apr 30, 2024
69. May 31, 2024
70. Jun 30, 2024
71. Jul 31, 2024
Total (Σ):

Show all

VarianceCSCO = Σ(RCSCO,tRCSCO)2 ÷ (71 – 1)
= ÷ (71 – 1)
=

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

CovarianceCSCO, S&P 500 = Σ(RCSCO,tRCSCO)×(RS&P 500,tRS&P 500) ÷ (71 – 1)
= ÷ (71 – 1)
=


Systematic Risk (β) Estimation

Microsoft Excel
VarianceCSCO
VarianceS&P 500
CovarianceCSCO, S&P 500
Correlation coefficientCSCO, S&P 5001
βCSCO2
αCSCO3

Calculations

1 Correlation coefficientCSCO, S&P 500
= CovarianceCSCO, S&P 500 ÷ (Standard deviationCSCO × Standard deviationS&P 500)
= ÷ ( × )
=

2 βCSCO
= CovarianceCSCO, S&P 500 ÷ VarianceS&P 500
= ÷
=

3 αCSCO
= AverageCSCO – βCSCO × AverageS&P 500
= ×
=


Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk (β) of Cisco Systems Inc. common stock βCSCO
 
Expected rate of return on Cisco Systems Inc. common stock3 E(RCSCO)

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(RCSCO) = RF + βCSCO [E(RM) – RF]
= + []
=