3. Measuring stand-alone risk using realized (historical) data Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: 2014 18.75% 2015 12.75% 2016 22.50% 2017 31.50% 2018 9.75% Stock return Given the preceding data, the average realized return on CCC's stock is of CCC's historical returns. Based on this conclusion, the standard deviation of CCC's The preceding data series represents historical returns is If investors expect the average realized return from 2014 to 2018 on CCC's stock to continue into the future, its coefficient of variation (CV) will be 2014 18.75% 2015 12.75% 2016 22.50% 2017 31.50% 2018 9.75% Stock return Given the preceding data, the average realized return on CCC's stock is Ins. Based on this conclusion, the standard deviation of CCC's The preceding data series represents historical returns is of CCC's hist 19.05% 47.63% If investors expect the average realized return from 2014 to 2018 on ca e no continue into the future, its coefficient of variation (CV) will be 38.10% 2014 18.75% 2015 12.75% 2016 22.50% 2017 31.50% 2018 9.75% Stock return the universe a sample Given the preceding data, the averag the population on CCC's stock is of CCC's historical returns. Based on this conclusion, the standard deviation of CCC's The preceding data series represents historical returns is _ If investors expect the average realized return from 2014 to 2018 on CCC's stock to continue into the future, its coefficient of variation (CV) will be 2014 19.75% 6.59% 2015 12.75% 2016 22.50% 2017 31.50% 2018 9.75% Stock return 7.66% Given the preceding 8.56% laverage realized return on CCC's stock is 11.56% esents of CCC's historical returns. Based on this conclusion, the standard deviation of CCC's The preceding data historical returns is If investors expect the average realized return from 2014 to 2018 on CCC's stock to continue into the future, its coefficient of variation (CV) will be 0.45 le preceding data, the average realized return on CCC's stock is of CCC's historical returns. Based on this conclusion, the standard deviation of CCC's eding data series represents returns is 0.83 brs expect the average realized return from 2014 to 2018 on CCC's stock to continue into the future, its coefficient of variation (CV) will be