Stock Analysis on Net
Stock Analysis on Net

General Dynamics Corp. (NYSE:GD)

This company has been moved to the archive! The financial data has not been updated since October 28, 2020.

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 General Dynamics Corp. common stock.

Rates of Return

General Dynamics Corp., monthly rates of return

Microsoft Excel
General Dynamics Corp. (GD) Standard & Poor’s 500 (S&P 500)
t Date PriceGD,t1 DividendGD,t1 RGD,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 $133.21 1,994.99
1. Feb 28, 2015 $138.78 4.18% 2,104.50 5.49%
2. Mar 31, 2015 $135.73 -2.20% 2,067.89 -1.74%
3. Apr 30, 2015 $137.32 $0.69 1.68% 2,085.51 0.85%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 $181.74 2.79% 3,140.98 3.40%
59. Dec 31, 2019 $176.35 -2.97% 3,230.78 2.86%
Average (R): 0.80% 0.88%
Standard deviation: 5.84% 3.45%
General Dynamics Corp. (GD) Standard & Poor’s 500 (S&P 500)
t Date PriceGD,t1 DividendGD,t1 RGD,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 $133.21 1,994.99
1. Feb 28, 2015 $138.78 4.18% 2,104.50 5.49%
2. Mar 31, 2015 $135.73 -2.20% 2,067.89 -1.74%
3. Apr 30, 2015 $137.32 $0.69 1.68% 2,085.51 0.85%
4. May 31, 2015 $140.16 2.07% 2,107.39 1.05%
5. Jun 30, 2015 $141.69 $0.69 1.58% 2,063.11 -2.10%
6. Jul 31, 2015 $149.11 5.24% 2,103.84 1.97%
7. Aug 31, 2015 $142.03 -4.75% 1,972.18 -6.26%
8. Sep 30, 2015 $137.95 -2.87% 1,920.03 -2.64%
9. Oct 31, 2015 $148.58 $0.69 8.21% 2,079.36 8.30%
10. Nov 30, 2015 $146.46 -1.43% 2,080.41 0.05%
11. Dec 31, 2015 $137.36 -6.21% 2,043.94 -1.75%
12. Jan 31, 2016 $133.77 $0.69 -2.11% 1,940.24 -5.07%
13. Feb 29, 2016 $136.27 1.87% 1,932.23 -0.41%
14. Mar 31, 2016 $131.37 -3.60% 2,059.74 6.60%
15. Apr 30, 2016 $140.52 $0.76 7.54% 2,065.30 0.27%
16. May 31, 2016 $141.87 0.96% 2,096.95 1.53%
17. Jun 30, 2016 $139.24 $0.76 -1.32% 2,098.86 0.09%
18. Jul 31, 2016 $146.89 5.49% 2,173.60 3.56%
19. Aug 31, 2016 $152.22 3.63% 2,170.95 -0.12%
20. Sep 30, 2016 $155.16 1.93% 2,168.27 -0.12%
21. Oct 31, 2016 $150.74 $0.76 -2.36% 2,126.15 -1.94%
22. Nov 30, 2016 $175.35 16.33% 2,198.81 3.42%
23. Dec 31, 2016 $172.66 -1.53% 2,238.83 1.82%
24. Jan 31, 2017 $181.08 $0.76 5.32% 2,278.87 1.79%
25. Feb 28, 2017 $189.81 4.82% 2,363.64 3.72%
26. Mar 31, 2017 $187.20 -1.38% 2,362.72 -0.04%
27. Apr 30, 2017 $193.79 $0.84 3.97% 2,384.20 0.91%
28. May 31, 2017 $203.25 4.88% 2,411.80 1.16%
29. Jun 30, 2017 $198.10 -2.53% 2,423.41 0.48%
30. Jul 31, 2017 $196.33 $0.84 -0.47% 2,470.30 1.93%
31. Aug 31, 2017 $201.35 2.56% 2,471.65 0.05%
32. Sep 30, 2017 $205.58 2.10% 2,519.36 1.93%
33. Oct 31, 2017 $202.98 $0.84 -0.86% 2,575.26 2.22%
34. Nov 30, 2017 $207.16 2.06% 2,647.58 2.81%
35. Dec 31, 2017 $203.45 -1.79% 2,673.61 0.98%
36. Jan 31, 2018 $222.48 $0.84 9.77% 2,823.81 5.62%
37. Feb 28, 2018 $222.45 -0.01% 2,713.83 -3.89%
38. Mar 31, 2018 $220.90 -0.70% 2,640.87 -2.69%
39. Apr 30, 2018 $201.31 $0.93 -8.45% 2,648.05 0.27%
40. May 31, 2018 $201.71 0.20% 2,705.27 2.16%
41. Jun 30, 2018 $186.41 -7.59% 2,718.37 0.48%
42. Jul 31, 2018 $199.76 $0.93 7.66% 2,816.29 3.60%
43. Aug 31, 2018 $193.40 -3.18% 2,901.52 3.03%
44. Sep 30, 2018 $204.72 5.85% 2,913.98 0.43%
45. Oct 31, 2018 $172.58 $0.93 -15.25% 2,711.74 -6.94%
46. Nov 30, 2018 $184.89 7.13% 2,760.17 1.79%
47. Dec 31, 2018 $157.21 -14.97% 2,506.85 -9.18%
48. Jan 31, 2019 $171.17 $0.93 9.47% 2,704.10 7.87%
49. Feb 28, 2019 $170.22 -0.56% 2,784.49 2.97%
50. Mar 31, 2019 $169.28 -0.55% 2,834.40 1.79%
51. Apr 30, 2019 $178.72 $1.02 6.18% 2,945.83 3.93%
52. May 31, 2019 $160.82 -10.02% 2,752.06 -6.58%
53. Jun 30, 2019 $181.82 13.06% 2,941.76 6.89%
54. Jul 31, 2019 $185.94 $1.02 2.83% 2,980.38 1.31%
55. Aug 31, 2019 $191.27 2.87% 2,926.46 -1.81%
56. Sep 30, 2019 $182.73 -4.46% 2,976.74 1.72%
57. Oct 31, 2019 $176.80 $1.02 -2.69% 3,037.56 2.04%
58. Nov 30, 2019 $181.74 2.79% 3,140.98 3.40%
59. Dec 31, 2019 $176.35 -2.97% 3,230.78 2.86%
Average (R): 0.80% 0.88%
Standard deviation: 5.84% 3.45%

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1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of GD during period t

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

Variance and Covariance

General Dynamics Corp., calculation of variance and covariance of returns

Microsoft Excel
t Date RGD,t RS&P 500,t (RGD,t–RGD)2 (RS&P 500,t–RS&P 500)2 (RGD,t–RGD)×(RS&P 500,t–RS&P 500)
1. Feb 28, 2015 4.18% 5.49% 11.41 21.25 15.57
2. Mar 31, 2015 -2.20% -1.74% 9.01 6.86 7.86
3. Apr 30, 2015 1.68% 0.85% 0.77 0.00 -0.02
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 2.79% 3.40% 3.96 6.38 5.03
59. Dec 31, 2019 -2.97% 2.86% 14.21 3.92 -7.46
Total (Σ): 1,975.33 688.77 785.06
t Date RGD,t RS&P 500,t (RGD,t–RGD)2 (RS&P 500,t–RS&P 500)2 (RGD,t–RGD)×(RS&P 500,t–RS&P 500)
1. Feb 28, 2015 4.18% 5.49% 11.41 21.25 15.57
2. Mar 31, 2015 -2.20% -1.74% 9.01 6.86 7.86
3. Apr 30, 2015 1.68% 0.85% 0.77 0.00 -0.02
4. May 31, 2015 2.07% 1.05% 1.60 0.03 0.21
5. Jun 30, 2015 1.58% -2.10% 0.61 8.88 -2.32
6. Jul 31, 2015 5.24% 1.97% 19.65 1.20 4.85
7. Aug 31, 2015 -4.75% -6.26% 30.83 50.94 39.63
8. Sep 30, 2015 -2.87% -2.64% 13.52 12.41 12.95
9. Oct 31, 2015 8.21% 8.30% 54.79 55.04 54.92
10. Nov 30, 2015 -1.43% 0.05% 4.98 0.69 1.85
11. Dec 31, 2015 -6.21% -1.75% 49.24 6.93 18.47
12. Jan 31, 2016 -2.11% -5.07% 8.50 35.43 17.35
13. Feb 29, 2016 1.87% -0.41% 1.13 1.67 -1.38
14. Mar 31, 2016 -3.60% 6.60% 19.36 32.72 -25.17
15. Apr 30, 2016 7.54% 0.27% 45.42 0.37 -4.11
16. May 31, 2016 0.96% 1.53% 0.02 0.43 0.10
17. Jun 30, 2016 -1.32% 0.09% 4.50 0.62 1.67
18. Jul 31, 2016 5.49% 3.56% 22.00 7.19 12.58
19. Aug 31, 2016 3.63% -0.12% 7.98 1.00 -2.83
20. Sep 30, 2016 1.93% -0.12% 1.27 1.01 -1.13
21. Oct 31, 2016 -2.36% -1.94% 10.00 7.96 8.92
22. Nov 30, 2016 16.33% 3.42% 240.94 6.44 39.40
23. Dec 31, 2016 -1.53% 1.82% 5.47 0.89 -2.20
24. Jan 31, 2017 5.32% 1.79% 20.37 0.83 4.10
25. Feb 28, 2017 4.82% 3.72% 16.14 8.07 11.41
26. Mar 31, 2017 -1.38% -0.04% 4.75 0.84 2.00
27. Apr 30, 2017 3.97% 0.91% 10.02 0.00 0.09
28. May 31, 2017 4.88% 1.16% 16.63 0.08 1.14
29. Jun 30, 2017 -2.53% 0.48% 11.14 0.16 1.33
30. Jul 31, 2017 -0.47% 1.93% 1.62 1.11 -1.34
31. Aug 31, 2017 2.56% 0.05% 3.07 0.68 -1.45
32. Sep 30, 2017 2.10% 1.93% 1.68 1.10 1.36
33. Oct 31, 2017 -0.86% 2.22% 2.76 1.79 -2.22
34. Nov 30, 2017 2.06% 2.81% 1.58 3.72 2.42
35. Dec 31, 2017 -1.79% 0.98% 6.73 0.01 -0.27
36. Jan 31, 2018 9.77% 5.62% 80.33 22.46 42.47
37. Feb 28, 2018 -0.01% -3.89% 0.67 22.79 3.90
38. Mar 31, 2018 -0.70% -2.69% 2.25 12.73 5.35
39. Apr 30, 2018 -8.45% 0.27% 85.59 0.37 5.62
40. May 31, 2018 0.20% 2.16% 0.37 1.64 -0.78
41. Jun 30, 2018 -7.59% 0.48% 70.38 0.16 3.31
42. Jul 31, 2018 7.66% 3.60% 47.01 7.41 18.67
43. Aug 31, 2018 -3.18% 3.03% 15.90 4.61 -8.56
44. Sep 30, 2018 5.85% 0.43% 25.49 0.20 -2.27
45. Oct 31, 2018 -15.25% -6.94% 257.58 61.14 125.50
46. Nov 30, 2018 7.13% 1.79% 40.05 0.82 5.74
47. Dec 31, 2018 -14.97% -9.18% 248.85 101.14 158.65
48. Jan 31, 2019 9.47% 7.87% 75.12 48.85 60.58
49. Feb 28, 2019 -0.56% 2.97% 1.85 4.38 -2.85
50. Mar 31, 2019 -0.55% 1.79% 1.84 0.83 -1.24
51. Apr 30, 2019 6.18% 3.93% 28.89 9.32 16.41
52. May 31, 2019 -10.02% -6.58% 117.07 55.61 80.68
53. Jun 30, 2019 13.06% 6.89% 150.16 36.17 73.69
54. Jul 31, 2019 2.83% 1.31% 4.09 0.19 0.88
55. Aug 31, 2019 2.87% -1.81% 4.25 7.23 -5.54
56. Sep 30, 2019 -4.46% 1.72% 27.76 0.70 -4.42
57. Oct 31, 2019 -2.69% 2.04% 12.19 1.36 -4.06
58. Nov 30, 2019 2.79% 3.40% 3.96 6.38 5.03
59. Dec 31, 2019 -2.97% 2.86% 14.21 3.92 -7.46
Total (Σ): 1,975.33 688.77 785.06

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VarianceGD = Σ(RGD,t–RGD)2 ÷ (59 – 1)
= 1,975.33 ÷ (59 – 1)
= 34.06

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (59 – 1)
= 688.77 ÷ (59 – 1)
= 11.88

CovarianceGD, S&P 500 = Σ(RGD,t–RGD)×(RS&P 500,t–RS&P 500) ÷ (59 – 1)
= 785.06 ÷ (59 – 1)
= 13.54

Systematic Risk (β) Estimation

Microsoft Excel
VarianceGD 34.06
VarianceS&P 500 11.88
CovarianceGD, S&P 500 13.54
Correlation coefficientGD, S&P 5001 0.67
βGD2 1.14
αGD3 -0.20%

Calculations

1 Correlation coefficientGD, S&P 500
= CovarianceGD, S&P 500 ÷ (Standard deviationGD × Standard deviationS&P 500)
= 13.54 ÷ (5.84% × 3.45%)
= 0.67

2 βGD
= CovarianceGD, S&P 500 ÷ VarianceS&P 500
= 13.54 ÷ 11.88
= 1.14

3 αGD
= AverageGD – βGD × AverageS&P 500
= 0.80% – 1.14 × 0.88%
= -0.20%

Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.69%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk (β) of General Dynamics Corp. common stock βGD 1.14
 
Expected rate of return on General Dynamics Corp. common stock3 E(RGD) 15.06%

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(RGD) = RF + βGD [E(RM) – RF]
= 4.69% + 1.14 [13.79% – 4.69%]
= 15.06%