6-11. (Measuring risk and rates of return) a. Given the holding-period returns shown here, compute the average returns and the standard deviations for Zing Telecom and for the market. MONTH ZING TELECOM MARKET 7% 3% 4% 2% 3 -2% 2% -4% -1% 5% 1% 0% 2% b. If Zing's beta is 1.67 and the risk-free rate is 5 percent, what would be an appro- priate required return for an investor owning Zing? (Note: Because the returns of Zing Telecom are based on monthly data, you will need to annualize the returns to make them compatible 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 Zing's historical average return compare with the return you be- 4)
6-11. (Measuring risk and rates of return) a. Given the holding-period returns shown here, compute the average returns and the standard deviations for Zing Telecom and for the market. MONTH ZING TELECOM MARKET 7% 3% 4% 2% 3 -2% 2% -4% -1% 5% 1% 0% 2% b. If Zing's beta is 1.67 and the risk-free rate is 5 percent, what would be an appro- priate required return for an investor owning Zing? (Note: Because the returns of Zing Telecom are based on monthly data, you will need to annualize the returns to make them compatible 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 Zing's historical average return compare with the return you be- 4)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:6-11. (Measuring risk and rates of return)
a. Given the holding-period returns shown here, compute the average returns
and the standard deviations for Zing Telecom and for the market.
MONTH
ZING TELECOM
MARKET
7%
3%
2
4%
2%
3.
-2%
2%
4
-4%
-1%
5
5%
1%
0%
2%
b. If Zing's beta is 1.67 and the risk-free rate is 5 percent, what would be an appro-
priate required return for an investor owning Zing? (Note: Because the returns of
Zing Telecom are based on monthly data, you will need to annualize the returns to
make them compatible 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 Zing's historical average return compare with the return you
lieve to be appropriate, given the firm's systematic risk?
be-
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