a. Given the following holding-period returns, Month Sugita Corp. Market 1 2.0 % 1.2 % 2 −1.0 4.0 3 0.0 1.0
Posted: Thu May 19, 2022 5:34 am
a. Given the following holding-period returns,
Month
Sugita Corp.
Market
1
2.0
%
1.2
%
2
−1.0
4.0
3
0.0
1.0
4
0.0
0.0
5
4.0
7.0
6
4.0
0.0
, compute the average returns and the standard deviations for
the Sugita Corporation and for the market.
b. If Sugita's beta is
1.25
and the risk-free rate is
7
percent, what would be an expected return for an investor
owning Sugita? (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 Sugita's historical average return compare
with the return you should expect based on the Capital Asset
Pricing Model and the firm's systematic risk?
a. Given the following holding-period returns,
Month
Sugita Corp.
Market
1
2.0
%
1.2
%
2
−1.0
4.0
3
0.0
1.0
4
0.0
0.0
5
4.0
7.0
6
4.0
0.0
, compute the average returns and the standard deviations for
the Sugita Corporation and for the market.
b. If Sugita's beta is
1.25
and the risk-free rate is
7
percent, what would be an expected return for an investor
owning Sugita? (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 Sugita's historical average return compare
with the return you should expect based on the Capital Asset
Pricing Model and the firm's systematic risk?