Micron Technology Inc. (NASDAQ:MU)

Capital Asset Pricing Model (CAPM)

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

Rates of Return
Variance and Covariance
Systematic Risk (β) Estimation
Expected Rate of Return

Rates of Return

Micron Technology Inc., monthly rates of return

		Micron Technology Inc. (MU)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_MU,t¹	Dividend_MU,t¹	R_MU,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Sep 30, 2018	$45.23			2,913.98
1.	Oct 31, 2018	$37.72		-16.60%	2,711.74	-6.94%
2.	Nov 30, 2018	$38.56		2.23%	2,760.17	1.79%
3.	Dec 31, 2018	$31.73		-17.71%	2,506.85	-9.18%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Jul 31, 2024	$109.82	$0.115	-16.42%	5,522.30	1.13%
71.	Aug 31, 2024	$96.24		-12.37%	5,648.40	2.28%
Average (R):				1.77%		1.07%
Standard deviation:				11.75%		5.24%

		Micron Technology Inc. (MU)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_MU,t¹	Dividend_MU,t¹	R_MU,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Sep 30, 2018	$45.23			2,913.98
1.	Oct 31, 2018	$37.72		-16.60%	2,711.74	-6.94%
2.	Nov 30, 2018	$38.56		2.23%	2,760.17	1.79%
3.	Dec 31, 2018	$31.73		-17.71%	2,506.85	-9.18%
4.	Jan 31, 2019	$38.22		20.45%	2,704.10	7.87%
5.	Feb 28, 2019	$40.88		6.96%	2,784.49	2.97%
6.	Mar 31, 2019	$41.33		1.10%	2,834.40	1.79%
7.	Apr 30, 2019	$42.06		1.77%	2,945.83	3.93%
8.	May 31, 2019	$32.61		-22.47%	2,752.06	-6.58%
9.	Jun 30, 2019	$38.59		18.34%	2,941.76	6.89%
10.	Jul 31, 2019	$44.89		16.33%	2,980.38	1.31%
11.	Aug 31, 2019	$45.27		0.85%	2,926.46	-1.81%
12.	Sep 30, 2019	$42.85		-5.35%	2,976.74	1.72%
13.	Oct 31, 2019	$47.55		10.97%	3,037.56	2.04%
14.	Nov 30, 2019	$47.51		-0.08%	3,140.98	3.40%
15.	Dec 31, 2019	$53.78		13.20%	3,230.78	2.86%
16.	Jan 31, 2020	$53.09		-1.28%	3,225.52	-0.16%
17.	Feb 29, 2020	$52.56		-1.00%	2,954.22	-8.41%
18.	Mar 31, 2020	$42.06		-19.98%	2,584.59	-12.51%
19.	Apr 30, 2020	$47.89		13.86%	2,912.43	12.68%
20.	May 31, 2020	$47.91		0.04%	3,044.31	4.53%
21.	Jun 30, 2020	$51.52		7.53%	3,100.29	1.84%
22.	Jul 31, 2020	$50.06		-2.83%	3,271.12	5.51%
23.	Aug 31, 2020	$45.51		-9.09%	3,500.31	7.01%
24.	Sep 30, 2020	$46.96		3.19%	3,363.00	-3.92%
25.	Oct 31, 2020	$50.34		7.20%	3,269.96	-2.77%
26.	Nov 30, 2020	$64.09		27.31%	3,621.63	10.75%
27.	Dec 31, 2020	$75.18		17.30%	3,756.07	3.71%
28.	Jan 31, 2021	$78.27		4.11%	3,714.24	-1.11%
29.	Feb 28, 2021	$91.53		16.94%	3,811.15	2.61%
30.	Mar 31, 2021	$88.21		-3.63%	3,972.89	4.24%
31.	Apr 30, 2021	$86.07		-2.43%	4,181.17	5.24%
32.	May 31, 2021	$84.14		-2.24%	4,204.11	0.55%
33.	Jun 30, 2021	$84.98		1.00%	4,297.50	2.22%
34.	Jul 31, 2021	$77.58		-8.71%	4,395.26	2.27%
35.	Aug 31, 2021	$73.70		-5.00%	4,522.68	2.90%
36.	Sep 30, 2021	$70.98	$0.10	-3.55%	4,307.54	-4.76%
37.	Oct 31, 2021	$69.10		-2.65%	4,605.38	6.91%
38.	Nov 30, 2021	$84.00		21.56%	4,567.00	-0.83%
39.	Dec 31, 2021	$93.15	$0.10	11.01%	4,766.18	4.36%
40.	Jan 31, 2022	$82.27		-11.68%	4,515.55	-5.26%
41.	Feb 28, 2022	$88.86		8.01%	4,373.94	-3.14%
42.	Mar 31, 2022	$77.89		-12.35%	4,530.41	3.58%
43.	Apr 30, 2022	$68.19	$0.10	-12.33%	4,131.93	-8.80%
44.	May 31, 2022	$73.84		8.29%	4,132.15	0.01%
45.	Jun 30, 2022	$55.28		-25.14%	3,785.38	-8.39%
46.	Jul 31, 2022	$61.86	$0.115	12.11%	4,130.29	9.11%
47.	Aug 31, 2022	$56.53		-8.62%	3,955.00	-4.24%
48.	Sep 30, 2022	$50.10		-11.37%	3,585.62	-9.34%
49.	Oct 31, 2022	$54.10	$0.115	8.21%	3,871.98	7.99%
50.	Nov 30, 2022	$57.65		6.56%	4,080.11	5.38%
51.	Dec 31, 2022	$49.98	$0.115	-13.10%	3,839.50	-5.90%
52.	Jan 31, 2023	$60.30		20.65%	4,076.60	6.18%
53.	Feb 28, 2023	$57.82		-4.11%	3,970.15	-2.61%
54.	Mar 31, 2023	$60.34		4.36%	4,109.31	3.51%
55.	Apr 30, 2023	$64.36	$0.115	6.85%	4,169.48	1.46%
56.	May 31, 2023	$68.20		5.97%	4,179.83	0.25%
57.	Jun 30, 2023	$63.11		-7.46%	4,376.86	4.71%
58.	Jul 31, 2023	$71.39	$0.115	13.30%	4,588.96	4.85%
59.	Aug 31, 2023	$69.94		-2.03%	4,507.66	-1.77%
60.	Sep 30, 2023	$68.03		-2.73%	4,288.05	-4.87%
61.	Oct 31, 2023	$66.87	$0.115	-1.54%	4,193.80	-2.20%
62.	Nov 30, 2023	$76.12		13.83%	4,567.80	8.92%
63.	Dec 31, 2023	$85.34	$0.115	12.26%	4,769.83	4.42%
64.	Jan 31, 2024	$85.75		0.48%	4,845.65	1.59%
65.	Feb 29, 2024	$90.61		5.67%	5,096.27	5.17%
66.	Mar 31, 2024	$117.89	$0.115	30.23%	5,254.35	3.10%
67.	Apr 30, 2024	$112.96		-4.18%	5,035.69	-4.16%
68.	May 31, 2024	$125.00		10.66%	5,277.51	4.80%
69.	Jun 30, 2024	$131.53		5.22%	5,460.48	3.47%
70.	Jul 31, 2024	$109.82	$0.115	-16.42%	5,522.30	1.13%
71.	Aug 31, 2024	$96.24		-12.37%	5,648.40	2.28%
Average (R):				1.77%		1.07%
Standard deviation:				11.75%		5.24%

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 MU during period t

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

Variance and Covariance

Micron Technology Inc., calculation of variance and covariance of returns

t	Date	R_MU,t	R_{S&P 500,t}	(R_MU,t–R_MU)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_MU,t–R_MU)×(R_{S&P 500,t}–R_{S&P 500})
1.	Oct 31, 2018	-16.60%	-6.94%	337.72	64.21	147.26
2.	Nov 30, 2018	2.23%	1.79%	0.21	0.51	0.32
3.	Dec 31, 2018	-17.71%	-9.18%	379.70	105.07	199.74
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.	.	.	.	.	.	.
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70.	Jul 31, 2024	-16.42%	1.13%	330.93	0.00	-1.08
71.	Aug 31, 2024	-12.37%	2.28%	199.91	1.47	-17.12
Total (Σ):				9,656.45	1,920.03	2,682.34

t	Date	R_MU,t	R_{S&P 500,t}	(R_MU,t–R_MU)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_MU,t–R_MU)×(R_{S&P 500,t}–R_{S&P 500})
1.	Oct 31, 2018	-16.60%	-6.94%	337.72	64.21	147.26
2.	Nov 30, 2018	2.23%	1.79%	0.21	0.51	0.32
3.	Dec 31, 2018	-17.71%	-9.18%	379.70	105.07	199.74
4.	Jan 31, 2019	20.45%	7.87%	348.97	46.18	126.95
5.	Feb 28, 2019	6.96%	2.97%	26.90	3.61	9.86
6.	Mar 31, 2019	1.10%	1.79%	0.45	0.52	-0.48
7.	Apr 30, 2019	1.77%	3.93%	0.00	8.17	-0.02
8.	May 31, 2019	-22.47%	-6.58%	587.63	58.53	185.46
9.	Jun 30, 2019	18.34%	6.89%	274.39	33.88	96.41
10.	Jul 31, 2019	16.33%	1.31%	211.77	0.06	3.49
11.	Aug 31, 2019	0.85%	-1.81%	0.86	8.31	2.67
12.	Sep 30, 2019	-5.35%	1.72%	50.68	0.42	-4.59
13.	Oct 31, 2019	10.97%	2.04%	84.55	0.94	8.92
14.	Nov 30, 2019	-0.08%	3.40%	3.45	5.44	-4.33
15.	Dec 31, 2019	13.20%	2.86%	130.51	3.19	20.41
16.	Jan 31, 2020	-1.28%	-0.16%	9.34	1.53	3.78
17.	Feb 29, 2020	-1.00%	-8.41%	7.68	89.94	26.28
18.	Mar 31, 2020	-19.98%	-12.51%	473.08	184.54	295.47
19.	Apr 30, 2020	13.86%	12.68%	146.12	134.83	140.36
20.	May 31, 2020	0.04%	4.53%	3.00	11.94	-5.98
21.	Jun 30, 2020	7.53%	1.84%	33.20	0.59	4.41
22.	Jul 31, 2020	-2.83%	5.51%	21.22	19.69	-20.44
23.	Aug 31, 2020	-9.09%	7.01%	117.99	35.21	-64.45
24.	Sep 30, 2020	3.19%	-3.92%	2.00	24.96	-7.06
25.	Oct 31, 2020	7.20%	-2.77%	29.42	14.74	-20.83
26.	Nov 30, 2020	27.31%	10.75%	652.35	93.74	247.28
27.	Dec 31, 2020	17.30%	3.71%	241.20	6.97	40.99
28.	Jan 31, 2021	4.11%	-1.11%	5.46	4.78	-5.11
29.	Feb 28, 2021	16.94%	2.61%	230.07	2.36	23.30
30.	Mar 31, 2021	-3.63%	4.24%	29.16	10.06	-17.12
31.	Apr 30, 2021	-2.43%	5.24%	17.63	17.39	-17.51
32.	May 31, 2021	-2.24%	0.55%	16.12	0.27	2.10
33.	Jun 30, 2021	1.00%	2.22%	0.60	1.32	-0.89
34.	Jul 31, 2021	-8.71%	2.27%	109.85	1.44	-12.60
35.	Aug 31, 2021	-5.00%	2.90%	45.89	3.34	-12.37
36.	Sep 30, 2021	-3.55%	-4.76%	28.39	33.99	31.06
37.	Oct 31, 2021	-2.65%	6.91%	19.55	34.12	-25.83
38.	Nov 30, 2021	21.56%	-0.83%	391.64	3.63	-37.72
39.	Dec 31, 2021	11.01%	4.36%	85.35	10.81	30.38
40.	Jan 31, 2022	-11.68%	-5.26%	180.99	40.09	85.18
41.	Feb 28, 2022	8.01%	-3.14%	38.90	17.71	-26.25
42.	Mar 31, 2022	-12.35%	3.58%	199.33	6.27	-35.36
43.	Apr 30, 2022	-12.33%	-8.80%	198.76	97.39	139.13
44.	May 31, 2022	8.29%	0.01%	42.41	1.14	-6.95
45.	Jun 30, 2022	-25.14%	-8.39%	724.07	89.58	254.68
46.	Jul 31, 2022	12.11%	9.11%	106.87	64.62	83.11
47.	Aug 31, 2022	-8.62%	-4.24%	107.94	28.27	55.24
48.	Sep 30, 2022	-11.37%	-9.34%	172.86	108.42	136.90
49.	Oct 31, 2022	8.21%	7.99%	41.48	47.80	44.53
50.	Nov 30, 2022	6.56%	5.38%	22.93	18.51	20.60
51.	Dec 31, 2022	-13.10%	-5.90%	221.36	48.58	103.70
52.	Jan 31, 2023	20.65%	6.18%	356.27	26.04	96.31
53.	Feb 28, 2023	-4.11%	-2.61%	34.64	13.57	21.68
54.	Mar 31, 2023	4.36%	3.51%	6.68	5.92	6.29
55.	Apr 30, 2023	6.85%	1.46%	25.80	0.15	1.99
56.	May 31, 2023	5.97%	0.25%	17.58	0.68	-3.46
57.	Jun 30, 2023	-7.46%	4.71%	85.31	13.26	-33.63
58.	Jul 31, 2023	13.30%	4.85%	132.92	14.24	43.50
59.	Aug 31, 2023	-2.03%	-1.77%	14.47	8.09	10.82
60.	Sep 30, 2023	-2.73%	-4.87%	20.29	35.34	26.78
61.	Oct 31, 2023	-1.54%	-2.20%	10.95	10.70	10.82
62.	Nov 30, 2023	13.83%	8.92%	145.44	61.55	94.61
63.	Dec 31, 2023	12.26%	4.42%	110.05	11.22	35.14
64.	Jan 31, 2024	0.48%	1.59%	1.67	0.27	-0.67
65.	Feb 29, 2024	5.67%	5.17%	15.17	16.80	15.96
66.	Mar 31, 2024	30.23%	3.10%	810.02	4.12	57.75
67.	Apr 30, 2024	-4.18%	-4.16%	35.46	27.40	31.17
68.	May 31, 2024	10.66%	4.80%	78.95	13.91	33.14
69.	Jun 30, 2024	5.22%	3.47%	11.91	5.73	8.26
70.	Jul 31, 2024	-16.42%	1.13%	330.93	0.00	-1.08
71.	Aug 31, 2024	-12.37%	2.28%	199.91	1.47	-17.12
Total (Σ):				9,656.45	1,920.03	2,682.34

Show all

Variance_MU = Σ(R_MU,t–R_MU)² ÷ (71 – 1)
= 9,656.45 ÷ (71 – 1)
= 137.95

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,920.03 ÷ (71 – 1)
= 27.43

Covariance_{MU, S&P 500} = Σ(R_MU,t–R_MU)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 2,682.34 ÷ (71 – 1)
= 38.32

Systematic Risk (β) Estimation

Variance_MU	137.95
Variance_{S&P 500}	27.43
Covariance_{MU, S&P 500}	38.32
Correlation coefficient_{MU, S&P 500}¹	0.62
β_MU²	1.40
α_MU³	0.27%

Calculations

¹ Correlation coefficient_{MU, S&P 500}
= Covariance_{MU, S&P 500} ÷ (Standard deviation_MU × Standard deviation_{S&P 500})
= 38.32 ÷ (11.75% × 5.24%)
= 0.62

² β_MU
= Covariance_{MU, S&P 500} ÷ Variance_{S&P 500}
= 38.32 ÷ 27.43
= 1.40

³ α_MU
= Average_MU – β_MU × Average_{S&P 500}
= 1.77% – 1.40 × 1.07%
= 0.27%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.67%
Expected rate of return on market portfolio²	E(R_M)	13.79%
Systematic risk (β) of Micron Technology Inc. common stock	β_MU	1.40

Expected rate of return on Micron Technology Inc. common stock³	E(R_MU)	17.41%

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(R_MU) = R_F + β_MU [E(R_M) – R_F]
= 4.67% + 1.40 [13.79% – 4.67%]
= 17.41%