Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

2015

2016

2017

2018

Stock return 17.50% 11.90% 21.00% 29.40% 9.10%

Given the preceding data, the average realized return on CCCs stock is ____________

The preceding data series represents__________ of CCCs historical returns. Based on this conclusion, the standard deviation of CCCs historical returns is ____________ .

If investors expect the average realized return from 2014 to 2018 on CCCs stock to continue into the future, its coefficient of variation (CV) will be ___________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Frequently Asked Questions In International Standards On Auditing

Authors: Steven Collings

1st Edition

1118765419, 978-1118765418

More Books

Students also viewed these Accounting questions

Question

How would the curve appear if the AT content were increased?

Answered: 1 week ago

Question

1. Why do people tell lies on their CVs?

Answered: 1 week ago

Question

2. What is the difference between an embellishment and a lie?

Answered: 1 week ago