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
Topic Video
Question
QC 59.
Transcribed Image Text:Month
1
2345
2
Sugita Corp.
2.2%
-0.8
1.0
- 1.0
6.0
6
6.0
k on the icon in order to copy its contents into a spreadsheet 1
The standard deviation for the Sugita Corporation is
(Related to Checkpoint 8.3) (CAPM and expected returns)
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 1.04 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
The average annual historical return for Sugita is
%. (Round to two decimal places.)
Given the holding-period returns shown in the table, the average monthly return for the market is
The standard deviation for the market is %. (Round to two decimal places.)
b. If Sugita's beta is. and the risk-free rate is 6 percent, the expected return for an investor owning Sugita is
Market
1.2%
4.0
3.0
- 1.0
6.0
2.0
%. (Round to two decimal places.)
%. (Round to three decimal places.)
(Round to three decimal places)
%. (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.)
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