Given the following holding-period returns, Month Sugita Corp. Market 1 2.2 % 1.0 % 2 1.0
Question:
Given the following holding-period returns,
Month | Sugita Corp. | Market | ||
---|---|---|---|---|
1 | 2.2 | % | 1.0 | % |
2 | −1.0 | 4.0 | ||
3 | 1.0 | 3.0 | ||
4 | −1.0 | −1.0 | ||
5 | 7.0 | 6.0 | ||
6 | 7.0 | 2.0 |
LOADING...
, compute the average returns and the standard deviations for the Sugita Corporation and for the market.b.
If Sugita's beta is
1.03
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?
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
1.03
and the risk-free rate is
9
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.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill