6-12B. (Measuring risk and rates ofreturn) a. Given the following holding-period returns, compute the average returns and

Question:

6-12B. (Measuring risk and rates ofreturn)

a. Given the following holding-period returns, compute the average returns and the standard deviations for the Sugita Corporation and for the market.

image text in transcribed

b. If Sugita's beta is U8 and the risk-free rate is 8 percent, what would be an appropriate required 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 believe to be a fair return, given the firm's systematic risk?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Management Principles And Applications

ISBN: 9780131450653

10th Edition

Authors: Arthur J. Keown, J. William Petty, John D. Martin, Jr. Scott, David F.

Question Posted: