a. Given the following holding-period returns..compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.87 and the risk-free rate is 9 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 holding-period returns shown in the table, the average monthly return for the Sugita Corporation is %. (Round to three decimal places.) The standard deviation for the Sugita Corporation is %. (Round to two decimal places.) Given the holding-period returns shown in the table, the average monthly return for the market is %. (Round to three decimal places.) The standard deviation for the market is %. (Round to two decimal places.) b. If Sugita's beta is 1.87 and the risk-free rate is 9 percent, the expected return for an investor owning Sugita is %. (Round to two decimal places.) The average annual historical return for Sugita is %. (Round to two decimal places.) 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? (Select from the drop-down menu.) Sugita's historical average return is the return based on the capital asset pricing model and the firm's systematic risk. less than greater than Data table Month 1 Sugita Corp. 2.0% Market 1.0% 2 0.0 2.0 3 -1.0 1.0 4 1.0 1.0 5 7.0 7.0 7.0 1.0 k on the icon in order to copy its contents into a spreadsheet)
a. Given the following holding-period returns..compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.87 and the risk-free rate is 9 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 holding-period returns shown in the table, the average monthly return for the Sugita Corporation is %. (Round to three decimal places.) The standard deviation for the Sugita Corporation is %. (Round to two decimal places.) Given the holding-period returns shown in the table, the average monthly return for the market is %. (Round to three decimal places.) The standard deviation for the market is %. (Round to two decimal places.) b. If Sugita's beta is 1.87 and the risk-free rate is 9 percent, the expected return for an investor owning Sugita is %. (Round to two decimal places.) The average annual historical return for Sugita is %. (Round to two decimal places.) 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? (Select from the drop-down menu.) Sugita's historical average return is the return based on the capital asset pricing model and the firm's systematic risk. less than greater than Data table Month 1 Sugita Corp. 2.0% Market 1.0% 2 0.0 2.0 3 -1.0 1.0 4 1.0 1.0 5 7.0 7.0 7.0 1.0 k on the icon in order to copy its contents into a spreadsheet)
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
Related questions
Question
quiz 8-18
Transcribed Image Text:a. Given the following holding-period returns..compute the average returns and the standard deviations for the Sugita Corporation and for the market.
b. If Sugita's beta is 1.87 and the risk-free rate is 9 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 holding-period returns shown in the table, the average monthly return for the Sugita Corporation is %. (Round to three decimal places.)
The standard deviation for the Sugita Corporation is %. (Round to two decimal places.)
Given the holding-period returns shown in the table, the average monthly return for the market is %. (Round to three decimal places.)
The standard deviation for the market is %. (Round to two decimal places.)
b. If Sugita's beta is 1.87 and the risk-free rate is 9 percent, the expected return for an investor owning Sugita is %. (Round to two decimal places.)
The average annual historical return for Sugita is %. (Round to two decimal places.)
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? (Select from the drop-down menu.)
Sugita's historical average return is
the return based on the capital asset pricing model and the firm's systematic risk.
less than
greater than
Data table
Month
1
Sugita Corp.
2.0%
Market
1.0%
2
0.0
2.0
3
-1.0
1.0
4
1.0
1.0
5
7.0
7.0
7.0
1.0
k on the icon in order to copy its contents into a spreadsheet)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education