3. Measuring stand-alone risk using realized (historical) data Returns earned over a given time period are called...

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3. Measuring stand-alone risk using realized(historical) data
Returns earned over a given time period are called realizedreturns. Historical data on realized returns is often used toestimate future results. Analysts across companies use realizedstock 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 thefollowing table. Remember:
1. While CCC was started 40 years ago, its common stock has beenpublicly traded for the past 25 years.
2. The returns on its equity are calculated as arithmeticreturns.
3. The historical returns for CCC for 2014 to 2018 are:
2014
2015
2016
2017
2018
Stock return 3.75% 2.55% 4.50% 6.30% 1.95%
a.Given the preceding data, the average realized return on CCC’sstock is_ .
b.The preceding data series represents__ of CCC’s historicalreturns. Based on this conclusion, the standard deviation of CCC’shistorical returns is_ .
c.If investors expect the average realized return from 2014 to2018 on CCC’s stock to continue into the future, its coefficient ofvariation (CV) will be __ .

	2014	2015	2016	2017	2018
Stock return	3.75%	2.55%	4.50%	6.30%	1.95%

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3. Measuring stand-alone risk using realized(historical) dataReturns earned over a given time period are called realizedreturns. Historical data on realized returns is often used toestimate future results. Analysts across companies use realizedstock 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 thefollowing table. Remember:1.While CCC was started 40 years ago, its common stock has beenpublicly traded for the past 25 years.2.The returns on its equity are calculated as arithmeticreturns.3.The historical returns for CCC for 2014 to 2018 are:20142015201620172018Stock return3.75%2.55%4.50%6.30%1.95%a.Given the preceding data, the average realized return on CCC’sstock is___ .b.The preceding data series represents______ of CCC’s historicalreturns. Based on this conclusion, the standard deviation of CCC’shistorical returns is_____ .c.If investors expect the average realized return from 2014 to2018 on CCC’s stock to continue into the future, its coefficient ofvariation (CV) will be ____ .

1.	While CCC was started 40 years ago, its common stock has beenpublicly traded for the past 25 years.
2.	The returns on its equity are calculated as arithmeticreturns.
3.	The historical returns for CCC for 2014 to 2018 are: