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, 2018 | $227.06 | 2,718.37 | ||||
1. | Jul 31, 2018 | $245.87 | 8.28% | 2,816.29 | 3.60% | |
2. | Aug 31, 2018 | $243.95 | -0.78% | 2,901.52 | 3.03% | |
3. | Sep 30, 2018 | $240.79 | $0.65 | -1.03% | 2,913.98 | 0.43% |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
70. | Apr 30, 2024 | $261.78 | -9.65% | 5,035.69 | -4.16% | |
71. | May 31, 2024 | $253.96 | -2.99% | 5,277.51 | 4.80% | |
Average (R): | 0.85% | 1.08% | ||||
Standard deviation: | 10.45% | 5.24% |
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, 2018 | $227.06 | 2,718.37 | ||||
1. | Jul 31, 2018 | $245.87 | 8.28% | 2,816.29 | 3.60% | |
2. | Aug 31, 2018 | $243.95 | -0.78% | 2,901.52 | 3.03% | |
3. | Sep 30, 2018 | $240.79 | $0.65 | -1.03% | 2,913.98 | 0.43% |
4. | Oct 31, 2018 | $220.34 | -8.49% | 2,711.74 | -6.94% | |
5. | Nov 30, 2018 | $229.00 | 3.93% | 2,760.17 | 1.79% | |
6. | Dec 31, 2018 | $161.33 | $0.65 | -29.27% | 2,506.85 | -9.18% |
7. | Jan 31, 2019 | $177.57 | 10.07% | 2,704.10 | 7.87% | |
8. | Feb 28, 2019 | $181.00 | 1.93% | 2,784.49 | 2.97% | |
9. | Mar 31, 2019 | $181.41 | $0.65 | 0.59% | 2,834.40 | 1.79% |
10. | Apr 30, 2019 | $189.46 | 4.44% | 2,945.83 | 3.93% | |
11. | May 31, 2019 | $154.28 | -18.57% | 2,752.06 | -6.58% | |
12. | Jun 30, 2019 | $164.19 | $0.65 | 6.84% | 2,941.76 | 6.89% |
13. | Jul 31, 2019 | $170.53 | 3.86% | 2,980.38 | 1.31% | |
14. | Aug 31, 2019 | $158.61 | -6.99% | 2,926.46 | -1.81% | |
15. | Sep 30, 2019 | $145.57 | $0.65 | -7.81% | 2,976.74 | 1.72% |
16. | Oct 31, 2019 | $152.66 | 4.87% | 3,037.56 | 2.04% | |
17. | Nov 30, 2019 | $160.05 | 4.84% | 3,140.98 | 3.40% | |
18. | Dec 31, 2019 | $151.21 | $0.65 | -5.12% | 3,230.78 | 2.86% |
19. | Jan 31, 2020 | $144.64 | -4.34% | 3,225.52 | -0.16% | |
20. | Feb 29, 2020 | $141.17 | -2.40% | 2,954.22 | -8.41% | |
21. | Mar 31, 2020 | $121.26 | $0.65 | -13.64% | 2,584.59 | -12.51% |
22. | Apr 30, 2020 | $126.77 | 4.54% | 2,912.43 | 12.68% | |
23. | May 31, 2020 | $130.56 | 2.99% | 3,044.31 | 4.53% | |
24. | Jun 30, 2020 | $140.22 | $0.65 | 7.90% | 3,100.29 | 1.84% |
25. | Jul 31, 2020 | $168.40 | 20.10% | 3,271.12 | 5.51% | |
26. | Aug 31, 2020 | $219.84 | 30.55% | 3,500.31 | 7.01% | |
27. | Sep 30, 2020 | $251.52 | $0.65 | 14.71% | 3,363.00 | -3.92% |
28. | Oct 31, 2020 | $259.47 | 3.16% | 3,269.96 | -2.77% | |
29. | Nov 30, 2020 | $286.58 | 10.45% | 3,621.63 | 10.75% | |
30. | Dec 31, 2020 | $259.62 | $0.65 | -9.18% | 3,756.07 | 3.71% |
31. | Jan 31, 2021 | $235.34 | -9.35% | 3,714.24 | -1.11% | |
32. | Feb 28, 2021 | $254.50 | 8.14% | 3,811.15 | 2.61% | |
33. | Mar 31, 2021 | $284.04 | $0.65 | 11.86% | 3,972.89 | 4.24% |
34. | Apr 30, 2021 | $290.31 | 2.21% | 4,181.17 | 5.24% | |
35. | May 31, 2021 | $314.81 | 8.44% | 4,204.11 | 0.55% | |
36. | Jun 30, 2021 | $298.33 | $0.75 | -5.00% | 4,297.50 | 2.22% |
37. | Jul 31, 2021 | $279.95 | -6.16% | 4,395.26 | 2.27% | |
38. | Aug 31, 2021 | $265.69 | -5.09% | 4,522.68 | 2.90% | |
39. | Sep 30, 2021 | $219.29 | $0.75 | -17.18% | 4,307.54 | -4.76% |
40. | Oct 31, 2021 | $235.53 | 7.41% | 4,605.38 | 6.91% | |
41. | Nov 30, 2021 | $230.37 | -2.19% | 4,567.00 | -0.83% | |
42. | Dec 31, 2021 | $258.64 | $0.75 | 12.60% | 4,766.18 | 4.36% |
43. | Jan 31, 2022 | $245.86 | -4.94% | 4,515.55 | -5.26% | |
44. | Feb 28, 2022 | $222.27 | -9.59% | 4,373.94 | -3.14% | |
45. | Mar 31, 2022 | $231.39 | $0.75 | 4.44% | 4,530.41 | 3.58% |
46. | Apr 30, 2022 | $198.74 | -14.11% | 4,131.93 | -8.80% | |
47. | May 31, 2022 | $224.58 | 13.00% | 4,132.15 | 0.01% | |
48. | Jun 30, 2022 | $226.71 | $1.15 | 1.46% | 3,785.38 | -8.39% |
49. | Jul 31, 2022 | $233.09 | 2.81% | 4,130.29 | 9.11% | |
50. | Aug 31, 2022 | $210.81 | -9.56% | 3,955.00 | -4.24% | |
51. | Sep 30, 2022 | $148.47 | $1.15 | -29.03% | 3,585.62 | -9.34% |
52. | Oct 31, 2022 | $160.28 | 7.95% | 3,871.98 | 7.99% | |
53. | Nov 30, 2022 | $182.22 | 13.69% | 4,080.11 | 5.38% | |
54. | Dec 31, 2022 | $173.20 | $1.15 | -4.32% | 3,839.50 | -5.90% |
55. | Jan 31, 2023 | $193.86 | 11.93% | 4,076.60 | 6.18% | |
56. | Feb 28, 2023 | $203.22 | 4.83% | 3,970.15 | -2.61% | |
57. | Mar 31, 2023 | $228.49 | $1.15 | 13.00% | 4,109.31 | 3.51% |
58. | Apr 30, 2023 | $227.78 | -0.31% | 4,169.48 | 1.46% | |
59. | May 31, 2023 | $217.98 | -4.30% | 4,179.83 | 0.25% | |
60. | Jun 30, 2023 | $247.90 | $1.26 | 14.30% | 4,376.86 | 4.71% |
61. | Jul 31, 2023 | $269.95 | 8.89% | 4,588.96 | 4.85% | |
62. | Aug 31, 2023 | $261.02 | -3.31% | 4,507.66 | -1.77% | |
63. | Sep 30, 2023 | $264.92 | $1.26 | 1.98% | 4,288.05 | -4.87% |
64. | Oct 31, 2023 | $240.10 | -9.37% | 4,193.80 | -2.20% | |
65. | Nov 30, 2023 | $258.83 | 7.80% | 4,567.80 | 8.92% | |
66. | Dec 31, 2023 | $252.97 | $1.26 | -1.78% | 4,769.83 | 4.42% |
67. | Jan 31, 2024 | $241.29 | -4.62% | 4,845.65 | 1.59% | |
68. | Feb 29, 2024 | $248.97 | 3.18% | 5,096.27 | 5.17% | |
69. | Mar 31, 2024 | $289.74 | $1.26 | 16.88% | 5,254.35 | 3.10% |
70. | Apr 30, 2024 | $261.78 | -9.65% | 5,035.69 | -4.16% | |
71. | May 31, 2024 | $253.96 | -2.99% | 5,277.51 | 4.80% | |
Average (R): | 0.85% | 1.08% | ||||
Standard deviation: | 10.45% | 5.24% |
Show all
1 Data in US$ per share of common stock, adjusted for splits and stock dividends.
2 Rate of return on common stock of 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, 2018 | 8.28% | 3.60% | 55.26 | 6.39 | 18.78 |
2. | Aug 31, 2018 | -0.78% | 3.03% | 2.66 | 3.81 | -3.18 |
3. | Sep 30, 2018 | -1.03% | 0.43% | 3.53 | 0.42 | 1.21 |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
. | . | . | . | . | . | . |
70. | Apr 30, 2024 | -9.65% | -4.16% | 110.26 | 27.42 | 54.99 |
71. | May 31, 2024 | -2.99% | 4.80% | 14.73 | 13.89 | -14.30 |
Total (Σ): | 7,649.93 | 1,923.46 | 2,512.67 |
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, 2018 | 8.28% | 3.60% | 55.26 | 6.39 | 18.78 |
2. | Aug 31, 2018 | -0.78% | 3.03% | 2.66 | 3.81 | -3.18 |
3. | Sep 30, 2018 | -1.03% | 0.43% | 3.53 | 0.42 | 1.21 |
4. | Oct 31, 2018 | -8.49% | -6.94% | 87.30 | 64.25 | 74.89 |
5. | Nov 30, 2018 | 3.93% | 1.79% | 9.49 | 0.51 | 2.19 |
6. | Dec 31, 2018 | -29.27% | -9.18% | 907.02 | 105.12 | 308.79 |
7. | Jan 31, 2019 | 10.07% | 7.87% | 84.93 | 46.15 | 62.61 |
8. | Feb 28, 2019 | 1.93% | 2.97% | 1.17 | 3.60 | 2.05 |
9. | Mar 31, 2019 | 0.59% | 1.79% | 0.07 | 0.51 | -0.19 |
10. | Apr 30, 2019 | 4.44% | 3.93% | 12.87 | 8.16 | 10.24 |
11. | May 31, 2019 | -18.57% | -6.58% | 377.10 | 58.57 | 148.61 |
12. | Jun 30, 2019 | 6.84% | 6.89% | 35.93 | 33.85 | 34.87 |
13. | Jul 31, 2019 | 3.86% | 1.31% | 9.07 | 0.06 | 0.72 |
14. | Aug 31, 2019 | -6.99% | -1.81% | 61.47 | 8.32 | 22.62 |
15. | Sep 30, 2019 | -7.81% | 1.72% | 75.03 | 0.41 | -5.57 |
16. | Oct 31, 2019 | 4.87% | 2.04% | 16.16 | 0.94 | 3.89 |
17. | Nov 30, 2019 | 4.84% | 3.40% | 15.92 | 5.43 | 9.30 |
18. | Dec 31, 2019 | -5.12% | 2.86% | 35.61 | 3.18 | -10.64 |
19. | Jan 31, 2020 | -4.34% | -0.16% | 26.99 | 1.53 | 6.43 |
20. | Feb 29, 2020 | -2.40% | -8.41% | 10.56 | 89.99 | 30.83 |
21. | Mar 31, 2020 | -13.64% | -12.51% | 210.06 | 184.61 | 196.93 |
22. | Apr 30, 2020 | 4.54% | 12.68% | 13.64 | 134.77 | 42.88 |
23. | May 31, 2020 | 2.99% | 4.53% | 4.58 | 11.92 | 7.39 |
24. | Jun 30, 2020 | 7.90% | 1.84% | 49.65 | 0.58 | 5.38 |
25. | Jul 31, 2020 | 20.10% | 5.51% | 370.43 | 19.67 | 85.36 |
26. | Aug 31, 2020 | 30.55% | 7.01% | 881.84 | 35.18 | 176.13 |
27. | Sep 30, 2020 | 14.71% | -3.92% | 191.98 | 24.98 | -69.25 |
28. | Oct 31, 2020 | 3.16% | -2.77% | 5.34 | 14.76 | -8.88 |
29. | Nov 30, 2020 | 10.45% | 10.75% | 92.12 | 93.69 | 92.90 |
30. | Dec 31, 2020 | -9.18% | 3.71% | 100.62 | 6.95 | -26.45 |
31. | Jan 31, 2021 | -9.35% | -1.11% | 104.09 | 4.79 | 22.33 |
32. | Feb 28, 2021 | 8.14% | 2.61% | 53.16 | 2.35 | 11.18 |
33. | Mar 31, 2021 | 11.86% | 4.24% | 121.26 | 10.04 | 34.89 |
34. | Apr 30, 2021 | 2.21% | 5.24% | 1.84 | 17.37 | 5.65 |
35. | May 31, 2021 | 8.44% | 0.55% | 57.59 | 0.28 | -4.00 |
36. | Jun 30, 2021 | -5.00% | 2.22% | 34.19 | 1.31 | -6.70 |
37. | Jul 31, 2021 | -6.16% | 2.27% | 49.16 | 1.44 | -8.41 |
38. | Aug 31, 2021 | -5.09% | 2.90% | 35.33 | 3.33 | -10.84 |
39. | Sep 30, 2021 | -17.18% | -4.76% | 325.16 | 34.01 | 105.17 |
40. | Oct 31, 2021 | 7.41% | 6.91% | 42.97 | 34.10 | 38.28 |
41. | Nov 30, 2021 | -2.19% | -0.83% | 9.25 | 3.64 | 5.80 |
42. | Dec 31, 2021 | 12.60% | 4.36% | 137.98 | 10.80 | 38.60 |
43. | Jan 31, 2022 | -4.94% | -5.26% | 33.54 | 40.12 | 36.68 |
44. | Feb 28, 2022 | -9.59% | -3.14% | 109.11 | 17.74 | 43.99 |
45. | Mar 31, 2022 | 4.44% | 3.58% | 12.89 | 6.26 | 8.98 |
46. | Apr 30, 2022 | -14.11% | -8.80% | 223.83 | 97.44 | 147.68 |
47. | May 31, 2022 | 13.00% | 0.01% | 147.66 | 1.14 | -13.00 |
48. | Jun 30, 2022 | 1.46% | -8.39% | 0.37 | 89.63 | -5.78 |
49. | Jul 31, 2022 | 2.81% | 9.11% | 3.86 | 64.58 | 15.78 |
50. | Aug 31, 2022 | -9.56% | -4.24% | 108.35 | 28.29 | 55.37 |
51. | Sep 30, 2022 | -29.03% | -9.34% | 892.61 | 108.47 | 311.16 |
52. | Oct 31, 2022 | 7.95% | 7.99% | 50.47 | 47.76 | 49.10 |
53. | Nov 30, 2022 | 13.69% | 5.38% | 164.82 | 18.49 | 55.20 |
54. | Dec 31, 2022 | -4.32% | -5.90% | 26.72 | 48.61 | 36.04 |
55. | Jan 31, 2023 | 11.93% | 6.18% | 122.72 | 26.01 | 56.50 |
56. | Feb 28, 2023 | 4.83% | -2.61% | 15.82 | 13.59 | -14.66 |
57. | Mar 31, 2023 | 13.00% | 3.51% | 147.63 | 5.90 | 29.52 |
58. | Apr 30, 2023 | -0.31% | 1.46% | 1.35 | 0.15 | -0.45 |
59. | May 31, 2023 | -4.30% | 0.25% | 26.55 | 0.68 | 4.26 |
60. | Jun 30, 2023 | 14.30% | 4.71% | 181.00 | 13.24 | 48.95 |
61. | Jul 31, 2023 | 8.89% | 4.85% | 64.71 | 14.22 | 30.33 |
62. | Aug 31, 2023 | -3.31% | -1.77% | 17.29 | 8.10 | 11.84 |
63. | Sep 30, 2023 | 1.98% | -4.87% | 1.27 | 35.37 | -6.70 |
64. | Oct 31, 2023 | -9.37% | -2.20% | 104.43 | 10.71 | 33.45 |
65. | Nov 30, 2023 | 7.80% | 8.92% | 48.31 | 61.51 | 54.51 |
66. | Dec 31, 2023 | -1.78% | 4.42% | 6.90 | 11.21 | -8.80 |
67. | Jan 31, 2024 | -4.62% | 1.59% | 29.89 | 0.26 | -2.81 |
68. | Feb 29, 2024 | 3.18% | 5.17% | 5.44 | 16.78 | 9.56 |
69. | Mar 31, 2024 | 16.88% | 3.10% | 257.00 | 4.11 | 32.49 |
70. | Apr 30, 2024 | -9.65% | -4.16% | 110.26 | 27.42 | 54.99 |
71. | May 31, 2024 | -2.99% | 4.80% | 14.73 | 13.89 | -14.30 |
Total (Σ): | 7,649.93 | 1,923.46 | 2,512.67 |
Show all
VarianceFDX = Σ(RFDX,t–RFDX)2 ÷ (71 – 1)
= 7,649.93 ÷ (71 – 1)
= 109.28
VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= 1,923.46 ÷ (71 – 1)
= 27.48
CovarianceFDX, S&P 500 = Σ(RFDX,t–RFDX)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= 2,512.67 ÷ (71 – 1)
= 35.90
Systematic Risk (β) Estimation
VarianceFDX | 109.28 |
VarianceS&P 500 | 27.48 |
CovarianceFDX, S&P 500 | 35.90 |
Correlation coefficientFDX, S&P 5001 | 0.66 |
βFDX2 | 1.31 |
αFDX3 | -0.55% |
Calculations
1 Correlation coefficientFDX, S&P 500
= CovarianceFDX, S&P 500 ÷ (Standard deviationFDX × Standard deviationS&P 500)
= 35.90 ÷ (10.45% × 5.24%)
= 0.66
2 βFDX
= CovarianceFDX, S&P 500 ÷ VarianceS&P 500
= 35.90 ÷ 27.48
= 1.31
3 αFDX
= AverageFDX – βFDX × AverageS&P 500
= 0.85% – 1.31 × 1.08%
= -0.55%
Expected Rate of Return
Assumptions | ||
Rate of return on LT Treasury Composite1 | RF | 4.65% |
Expected rate of return on market portfolio2 | E(RM) | 13.79% |
Systematic risk (β) of FedEx Corp. common stock | βFDX | 1.31 |
Expected rate of return on FedEx Corp. common stock3 | E(RFDX) | 16.59% |
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]
= 4.65% + 1.31 [13.79% – 4.65%]
= 16.59%