Given the following holding-period returns, LOADING... Month Sugita Corp. Market 1 2.4 % 1.0 % 2 −1.0 2.0 3 0.0 3.0 4 0.0 0.0 5 7.0 7.0 6 7.0 1.0 , compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.84 and the risk-free rate is 6 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? Question content area bottom Part 1 a. Given the holding-period returns shown in the table, the average monthly return for the Sugita Corporation is enter your response here%. (Round to three decimal places.) Part 2 The standard deviation for the Sugita Corporation is enter your response here%. (Round to two decimal places.) Part 3 Given the holding-period returns shown in the table, the average monthly return for the market is enter your response here%. (Round to three decimal places.) Part 4 The standard deviation for the market is enter your response here%. (Round to two decimal places.) Part 5 b. If Sugita's beta is 1.84 and the risk-free rate is 6 percent, the expected return for an investor owning Sugita is enter your response here%. (Round to two decimal places.) Part 6 The average annual historical return for Sugita is enter your response here%. (Round to two decimal places.) Part 7 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 ▼ less than greater than the return based on the capital asset pricing model and the firm's systematic risk.

Given the following holding-period returns, LOADING... Month Sugita Corp. Market 1 2.4 % 1.0 % 2 −1.0 2.0 3 0.0 3.0 4 0.0 0.0 5 7.0 7.0 6 7.0 1.0 , compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.84 and the risk-free rate is 6 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? Question content area bottom Part 1 a. Given the holding-period returns shown in the table, the average monthly return for the Sugita Corporation is enter your response here%. (Round to three decimal places.) Part 2 The standard deviation for the Sugita Corporation is enter your response here%. (Round to two decimal places.) Part 3 Given the holding-period returns shown in the table, the average monthly return for the market is enter your response here%. (Round to three decimal places.) Part 4 The standard deviation for the market is enter your response here%. (Round to two decimal places.) Part 5 b. If Sugita's beta is 1.84 and the risk-free rate is 6 percent, the expected return for an investor owning Sugita is enter your response here%. (Round to two decimal places.) Part 6 The average annual historical return for Sugita is enter your response here%. (Round to two decimal places.) Part 7 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 ▼ less than greater than the return 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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Question content area top

Part 1

(Related to Checkpoint 8.3) (CAPM and expected returns)

a. Given the following holding-period returns,

Month	Sugita Corp.	Market
1	2.4	%	1.0	%
2	−1.0		2.0
3	0.0		3.0
4	0.0		0.0
5	7.0		7.0
6	7.0		1.0

compute the average returns and the standard deviations for the Sugita Corporation and for the market.

b. If Sugita's beta is

1.84

and the risk-free rate is

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?

Question content area bottom

Part 1

a. Given the holding-period returns shown in the table, the average monthly return for the Sugita Corporation is

enter your response here%.

(Round to three decimal places.)

Part 2

The standard deviation for the Sugita Corporation is

enter your response here%.

(Round to two decimal places.)

Part 3

Given the holding-period returns shown in the table, the average monthly return for the market is

enter your response here%.

(Round to three decimal places.)

Part 4

The standard deviation for the market is

enter your response here%.

(Round to two decimal places.)

Part 5

b. If Sugita's beta is

1.84

and the risk-free rate is

percent, the expected return for an investor owning Sugita is

enter your response here%.

(Round to two decimal places.)

Part 6

The average annual historical return for Sugita is

enter your response here%.

(Round to two decimal places.)

Part 7

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

▼

less than

greater than

the return based on the capital asset pricing model and the firm's systematic risk.

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