As you may suspect, the equation for the CAPM is the equation for a straight line: Y=a+bX . In other words, once we have the needed information, we can use simple regression analysis to arrive at a beta (regression coefficient) for a given stock. To do so, we need two sets of data over a given time period: Rates of returns for both a stock and "the market"- as represented by either DJI or S&P Indices- over the same time period. This project requires you to conduct a regression analysis using Excel and to find the beta for the publicly-traded Apple Computers Corporation. You will also be asked to demonstrate your understanding of some of the key investment-related issues.
To get started on the project you are being provided with the information that need. (Tabled Data Below). As you see from the following pages, using Yahoo Finance at http://finance.yahoo.com/ , you are given the monthly stock prices for both Apple and DJIA. The two data sets given here contain over 40 monthly prices (covering over 3.5 years of stock price data). You need 37 such observations covering January 2000 through January 2003 to finish your project. Furthermore, you may actually go to the above site and download such data in Excel Spreadsheet format. This saves you time for entering data manually. The ticker symbol for Apple is AAPL and for DJI is DJI. Use Yahoo Finance’s “Historical Prices” hot link to get the prices first and then convert such prices into returns (%) as you have learned in this class. Use the three-year time periods specified above. Then answer the following questions:
1. What is Apple's beta given the 36-month data specified for this project?
2. Interpret your calculated beta. What does this figure show? Explain.
3. Go to http://finance.yahoo.com/ and find and report the latest beta value available for Apple given at that sight. To do this, once you have entered the symbol of Apple, click on Profile and scroll down to see the beta value for the company. What is the latest beta for Apple? (State the date when you observed such beta in your report). Now, compare your calculated beta for the company with the latest beta. Are there any significant differences? What might explain such a difference, if any at all? Explain.
4. By going back to http://finance.yahoo.com/, find the latest value for Microsoft. MS’ symbol is MSFT. Compare the two betas. Why are the two betas different? Explain.
5. Plug the two betas you just looked up in the CAPM equation and find the required rates of return for both Apple and Microsoft. You may use 12% as the market rate of return (km) and use the current yields on 10-year T-Notes as the risk-free rate (krf). What do these required rates tell potential investors interested in Apple and Microsoft? Explain your thoughts.
Please submit your assignment.
HISTORICAL MARKET “PRICES” AS REPRESENTED BY THE DJIA INDEX
Date / Open / High / Low / Close / Volume / Adj. Close*Jul 03 / 8,983.66 / 9,068.05 / 8,843.61 / 9,040.95 / 29,204,000 / 9,040.95
Jun 03 / 8,851.45 / 9,406.50 / 8,823.51 / 8,985.44 / 15,622,190 / 8,985.44
May 03 / 8,478.48 / 8,897.04 / 8,328.55 / 8,850.26 / 15,543,285 / 8,850.26
Apr 03 / 7,992.83 / 8,587.72 / 7,947.38 / 8,480.09 / 14,985,771 / 8,480.09
Mar 03 / 7,890.24 / 8,552.08 / 7,397.31 / 7,992.13 / 15,035,966 / 7,992.13
Feb 03 / 8,053.74 / 8,189.35 / 7,602.81 / 7,891.08 / 14,004,526 / 7,891.08
Jan 03 / 8,342.38 / 8,896.09 / 7,884.66 / 8,053.81 / 15,394,338 / 8,053.81
Dec 02 / 8,902.95 / 9,076.35 / 8,214.93 / 8,341.63 / 12,896,257 / 8,341.63
Nov 02 / 8,395.64 / 8,995.78 / 8,237.65 / 8,896.09 / 14,881,610 / 8,896.09
Oct 02 / 7,593.04 / 8,607.04 / 7,181.47 / 8,397.03 / 17,172,873 / 8,397.03
Sep 02 / 8,659.27 / 8,767.82 / 7,422.28 / 7,591.93 / 14,739,590 / 7,591.93
Aug 02 / 8,732.60 / 9,129.10 / 7,991.40 / 8,663.50 / 13,740,136 / 8,663.50
Jul 02 / 9,239.30 / 9,433.10 / 7,489.50 / 8,736.60 / 20,126,400 / 8,736.60
Jun 02 / 9,923.90 / 10,016.00 / 8,831.90 / 9,243.30 / 15,210,395 / 9,243.30
May 02 / 9,944.90 / 10,400.60 / 9,749.70 / 9,925.30 / 12,796,136 / 9,925.30
Apr 02 / 10,402.10 / 10,437.40 / 9,767.20 / 9,946.20 / 13,726,136 / 9,946.20
Mar 02 / 10,111.00 / 10,728.90 / 10,086.50 / 10,403.90 / 13,855,400 / 10,403.90
Feb 02 / 9,923.00 / 10,315.70 / 9,503.50 / 10,106.10 / 14,442,000 / 10,106.10
Jan 02 / 10,021.70 / 10,345.40 / 9,443.30 / 9,920.00 / 14,906,285 / 9,920.00
Dec 01 / 9,848.90 / 10,220.80 / 9,651.90 / 10,021.60 / 13,036,085 / 10,021.60
Nov 01 / 9,087.50 / 10,054.60 / 8,987.60 / 9,851.60 / 13,177,904 / 9,851.60
Oct 01 / 8,846.00 / 9,626.50 / 8,659.90 / 9,075.10 / 13,610,339 / 9,075.10
Sep 01 / 9,947.00 / 10,238.50 / 7,926.90 / 8,847.60 / 17,899,060 / 8,847.60
Aug 01 / 10,527.40 / 10,663.10 / 9,829.40 / 9,949.80 / 10,556,217 / 9,949.80
Jul 01 / 10,505.00 / 10,758.10 / 10,049.40 / 10,522.80 / 11,868,052 / 10,522.80
Jun 01 / 10,913.60 / 11,236.70 / 10,313.40 / 10,502.40 / 12,657,328 / 10,502.40
May 01 / 10,734.10 / 11,436.40 / 10,638.50 / 10,911.90 / 11,705,681 / 10,911.90
Apr 01 / 9,877.20 / 10,973.20 / 9,303.50 / 10,735.00 / 13,272,245 / 10,735.00
Mar 01 / 10,493.30 / 10,940.50 / 9,047.60 / 9,878.80 / 13,221,550 / 9,878.80
Feb 01 / 10,884.80 / 11,140.10 / 10,225.10 / 10,495.30 / 12,036,684 / 10,495.30
Jan 01 / 10,790.90 / 11,224.40 / 10,325.70 / 10,887.40 / 12,151,623 / 10,887.40
Dec 00 / 10,416.80 / 11,044.70 / 10,158.20 / 10,788.00 / 11,620,655 / 10,788.00
Nov 00 / 10,966.20 / 11,152.00 / 10,204.80 / 10,414.50 / 10,342,300 / 10,414.50
Oct 00 / 10,659.10 / 11,108.80 / 9,571.40 / 10,971.10 / 12,417,181 / 10,971.10
Sep 00 / 11,219.50 / 11,518.80 / 10,439.30 / 10,650.90 / 11,017,700 / 10,650.90
Aug 00 / 10,523.80 / 11,416.00 / 10,428.60 / 11,215.10 / 9,309,608 / 11,215.10
Jul 00 / 10,450.40 / 10,980.30 / 10,303.30 / 10,522.00 / 10,020,850 / 10,522.00
Jun 00 / 10,532.30 / 11,013.10 / 10,161.50 / 10,447.90 / 10,544,545 / 10,447.90
May 00 / 10,749.40 / 11,086.70 / 10,163.20 / 10,522.30 / 9,481,272 / 10,522.30
Apr 00 / 10,863.30 / 11,600.40 / 10,128.60 / 10,733.90 / 11,100,557 / 10,733.90
Mar 00 / 10,128.10 / 11,311.30 / 9,611.80 / 10,921.90 / 11,905,913 / 10,921.90
Feb 00 / 10,937.70 / 11,228.40 / 9,760.40 / 10,128.30 / 11,058,150 / 10,128.30
Jan 00 / 11,501.90 / 11,908.50 / 10,610.40 / 10,940.50 / 11,244,100 / 10,940.50
Source:
Yahoo Finance. (2005). Retreived October 14, 2004 from http://finance.yahoo.com http://finance.yahoo.com/
HISTORICAL STOCK PRICES FOR APPLE COMPUTERS
Date / Open / High / Low / Close / Volume / Adj. Close*Jul 03 / 18.87 / 19.18 / 18.51 / 19.09 / 6,464,000 / 19.09
Jun 03 / 18.10 / 19.69 / 16.63 / 19.06 / 5,387,319 / 19.06
May 03 / 14.25 / 19.01 / 14.00 / 17.95 / 9,518,957 / 17.95
Apr 03 / 14.20 / 14.95 / 12.72 / 14.22 / 7,001,290 / 14.22
Mar 03 / 15.01 / 15.16 / 14.04 / 14.14 / 3,643,761 / 14.14
Feb 03 / 14.41 / 15.30 / 13.80 / 15.01 / 4,050,189 / 15.01
Jan 03 / 14.36 / 15.38 / 13.56 / 14.36 / 5,431,171 / 14.36
Dec 02 / 15.90 / 16.10 / 13.78 / 14.33 / 4,023,100 / 14.33
Nov 02 / 15.94 / 17.38 / 15.01 / 15.50 / 4,174,245 / 15.50
Oct 02 / 14.59 / 16.44 / 13.36 / 16.07 / 5,362,786 / 16.07
Sep 02 / 14.49 / 15.19 / 14.05 / 14.50 / 4,937,085 / 14.50
Aug 02 / 15.11 / 16.25 / 13.97 / 14.75 / 4,338,640 / 14.75
Jul 02 / 17.71 / 18.79 / 13.80 / 15.26 / 6,841,813 / 15.26
Jun 02 / 23.39 / 23.45 / 15.98 / 17.72 / 8,015,960 / 17.72
May 02 / 24.29 / 25.98 / 22.14 / 23.30 / 5,147,445 / 23.30
Apr 02 / 23.38 / 26.17 / 23.00 / 24.27 / 5,441,395 / 24.27
Mar 02 / 21.93 / 25.30 / 21.82 / 23.67 / 4,845,570 / 23.67
Feb 02 / 25.09 / 25.98 / 20.94 / 21.70 / 7,745,464 / 21.70
Jan 02 / 22.05 / 24.73 / 20.25 / 24.72 / 7,639,304 / 24.72
Dec 01 / 21.06 / 24.03 / 20.09 / 21.90 / 4,256,805 / 21.90
Nov 01 / 17.65 / 21.55 / 17.25 / 21.30 / 4,824,538 / 21.30
Oct 01 / 15.49 / 19.42 / 14.83 / 17.56 / 6,069,873 / 17.56
Sep 01 / 18.50 / 19.08 / 14.68 / 15.51 / 7,019,800 / 15.51
Aug 01 / 19.01 / 19.90 / 17.28 / 18.55 / 4,150,826 / 18.55
Jul 01 / 23.64 / 25.22 / 17.85 / 18.79 / 7,559,633 / 18.79
Jun 01 / 20.13 / 25.10 / 19.35 / 23.25 / 6,933,380 / 23.25
May 01 / 25.41 / 26.70 / 19.30 / 19.95 / 6,421,531 / 19.95
Apr 01 / 22.09 / 27.12 / 18.75 / 25.49 / 10,405,150 / 25.49
Mar 01 / 17.81 / 23.75 / 17.19 / 22.07 / 9,090,431 / 22.07
Feb 01 / 20.69 / 21.94 / 18.00 / 18.25 / 7,078,947 / 18.25
Jan 01 / 14.88 / 22.50 / 14.44 / 21.62 / 12,279,052 / 21.62
Dec 00 / 17.00 / 17.50 / 13.62 / 14.88 / 8,472,595 / 14.88
Nov 00 / 19.44 / 23.00 / 16.12 / 16.50 / 7,906,438 / 16.50
Oct 00 / 26.69 / 26.75 / 17.50 / 19.56 / 18,499,731 / 19.56
Sep 00 / 61.31 / 64.12 / 25.38 / 25.75 / 19,588,010 / 25.75
Aug 00 / 50.31 / 61.50 / 44.25 / 60.94 / 4,701,617 / 60.94
Jul 00 / 52.12 / 60.62 / 46.88 / 50.81 / 5,269,705 / 50.81
Jun 00 / 2:1 Stock Split
Jun 00 / 81.75 / 103.94 / 50.31 / 52.38 / 4,511,400 / 52.38
May 00 / 124.88 / 126.25 / 81.75 / 84.00 / 4,156,354 / 42.00
Apr 00 / 135.50 / 139.50 / 104.88 / 124.06 / 4,187,963 / 62.03
Mar 00 / 118.56 / 150.38 / 114.00 / 135.81 / 3,533,769 / 67.91
Feb 00 / 104.00 / 119.94 / 97.00 / 114.62 / 3,432,475 / 57.31
Jan 00 / 104.87 / 121.50 / 86.50 / 103.75 / 5,918,240 / 51.88
Reference:
Yahoo Finance. (2005). Retreived October 14, 2004 from http://finance.yahoo.com http://finance.yahoo.com/