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.

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?

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MONTH SUGITA CORP. MARKET 1 2 1.8% 1.5% -0.5 3 2.0 0.0 85 1.0 456 -2.0. -2.0 5.0 4.0 5.0 3.0