a. Given the following holding-period returns, (Below) compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.18 and the risk-free rate is 4 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, (Below) compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.18 and the risk-free rate is 4 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?
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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a. Given the following holding-period returns, (Below)
compute the average returns and the standard deviations for the Sugita Corporation and for the market.
compute the average returns and the standard deviations for the Sugita Corporation and for the market.
b. If Sugita's beta is 1.18
and the risk-free rate is 4 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.)
and the risk-free rate is 4 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?
Transcribed Image Text:Data table
Market
1.5%
1.0
0.0
- 2.0
5.0
4.0
6
5.0
3.0
(Click on the icon in order to copy its contents into a spreadsheet.)
Month
1
2345
Sugita Corp.
1.8%
-0.5
2.0
- 2.0
Print
Done
I
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