a. Given the following holding-period returns, Month Zemin Corp. Market 1 8 % 3 % 2 4 3 3 0 1 4 −4 −3 5 6 3
Posted: Thu May 19, 2022 12:25 am
a. Given the following holding-period returns,
Month
Zemin Corp.
Market
1
8
%
3
%
2
4
3
3
0
1
4
−4
−3
5
6
3
6
2
3
, compute the average returns and the standard deviations for
the Zemin Corporation and for the market.b. If Zemin's beta
is
1.28
and the risk-free rate is
7
percent, what would be an expected return for an investor
owning Zemin? (Note: Because the preceding returns are
based on monthly data, you will need to annualize the returns
to make them comparable with the risk-free rate.
For simplicity, you can convert from monthly to yearly
returns by multiplying the average monthly returns
by 12.)
c. How does Zemin's historical average return compare
with the return you believe you should expect based on the capital
asset pricing model and the firm's systematic risk?
Month
Zemin Corp.
Market
1
8
%
3
%
2
4
3
3
0
1
4
−4
−3
5
6
3
6
2
3
, compute the average returns and the standard deviations for
the Zemin Corporation and for the market.b. If Zemin's beta
is
1.28
and the risk-free rate is
7
percent, what would be an expected return for an investor
owning Zemin? (Note: Because the preceding returns are
based on monthly data, you will need to annualize the returns
to make them comparable with the risk-free rate.
For simplicity, you can convert from monthly to yearly
returns by multiplying the average monthly returns
by 12.)
c. How does Zemin's historical average return compare
with the return you believe you should expect based on the capital
asset pricing model and the firm's systematic risk?