Given the holding-period returns shown below, compute the average returns and the standard deviations for the GreenSpace
Question:
Given the holding-period returns shown below, compute the average returns and the standard deviations for the GreenSpace Corporation and for the market (10 points):
Month | GreenSpace | Market |
1 | 5% | 4% |
2 | 3% | 2% |
3 | -2% | 1% |
4 | -2% | -2% |
5 | 5% | 2% |
6 | 4% | 2% |
If GreenSpace’s beta is 1.24 and the risk-free rate is 5%, what would be an appropriate required return for an investor owning GreenSpace? (Note: Because the returns of GreenSpace Corporation are based on monthly data, you will need to annualize the returns to make them compatible with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) (5 points).
How does GreenSpace’s historical average return compare with the return you believe to be an appropriate, given the firm’s systematic risk? (5 points)
Expert Answer:
GreenSpace Corporation A Average returns 1 5 2 3 3 2 4 2 5 5 6 4 Average return 5322546 Average retu... View the full answer
