(CAPM and expected returns) a. Given the following holding-period returns, compute the average returns and the standard deviations for the Zemin Corporation and for the market. b. If Zemin's beta is 1.84 and the risk-free rate is 9 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? - a. Given the holding-period returns shown in the table, the average monthly return for the Zemin Corporation is %. (Round to two decimal places.) The standard deviation for the Zemin Corporation is %. (Round to two decimal places.) Data table 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 Zemin's beta is 1.84 and the risk-free rate is 9 percent, the expected return for an investor owning Zemin is %. (Round to two decimal places.) The average annual historical return for Zemin is %. (Round to two decimal places.) 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? Zemin's historical average return is the return based on the capital asset pricing model and the firm's systematic risk. Month 1 Zemin Corp. 8% Market 3% 2 2 4 3 -1 1 4 -4 0 5 4 1 6 2 1 (Click on the icon in order to copy its contents into a spreadsheet.) less than greater than Print Done
(CAPM and expected returns) a. Given the following holding-period returns, compute the average returns and the standard deviations for the Zemin Corporation and for the market. b. If Zemin's beta is 1.84 and the risk-free rate is 9 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? - a. Given the holding-period returns shown in the table, the average monthly return for the Zemin Corporation is %. (Round to two decimal places.) The standard deviation for the Zemin Corporation is %. (Round to two decimal places.) Data table 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 Zemin's beta is 1.84 and the risk-free rate is 9 percent, the expected return for an investor owning Zemin is %. (Round to two decimal places.) The average annual historical return for Zemin is %. (Round to two decimal places.) 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? Zemin's historical average return is the return based on the capital asset pricing model and the firm's systematic risk. Month 1 Zemin Corp. 8% Market 3% 2 2 4 3 -1 1 4 -4 0 5 4 1 6 2 1 (Click on the icon in order to copy its contents into a spreadsheet.) less than greater than Print Done
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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Question
quiz 8-6
Transcribed Image Text:(CAPM and expected returns)
a. Given the following holding-period returns,
compute the average returns and the standard deviations for the Zemin Corporation and for the market.
b. If Zemin's beta is 1.84 and the risk-free rate is 9 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?
-
a. Given the holding-period returns shown in the table, the average monthly return for the Zemin Corporation is %. (Round to two decimal places.)
The standard deviation for the Zemin Corporation is %. (Round to two decimal places.)
Data table
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 Zemin's beta is 1.84 and the risk-free rate is 9 percent, the expected return for an investor owning Zemin is %. (Round to two decimal places.)
The average annual historical return for Zemin is %. (Round to two decimal places.)
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?
Zemin's historical average return is
the return based on the capital asset pricing model and the firm's systematic risk.
Month
1
Zemin Corp.
8%
Market
3%
2
2
4
3
-1
1
4
-4
0
5
4
1
6
2
1
(Click on the icon in order to copy its contents into a spreadsheet.)
less than
greater than
Print
Done
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