CAPM and expected? returns.. a.??Given the following? holding-period returns, compute the average returns and the standard deviations for the...

80.2K

Verified Solution

Question

Finance

CAPM andexpected? returns..
a.??Given the following? holding-periodreturns, compute the average returns and the standard deviationsfor the Zemin Corporation and for the market.
b.??If? Zemin's beta is 1.88 and the? risk-freerate is 7 percent, what would be an expected return for an investorowning? Zemin? ?
(Note: Because the preceding returns are based on monthly? data,you will need to annualize the returns to make them comparable withthe? risk-free rate. For? simplicity, you can convert from monthlyto yearly returns by multiplying the average monthly returns by?12.)
c.??How does? Zemin's historical average returncompare with the return you believe you should expect based on thecapital asset pricing model and the? firm's systematic? risk?
Month Zemin Corp. Market
1 8% 6%
2 4% 1%
3 0% 1%
4 -1% -1%
5 6% 4%
6 2% 1%

Answer & Explanation Solved by verified expert

4.2 Ratings (620 Votes)

Answer aZemin CorpAverage monthly return 317Standard deviation 34881MarketAverage monthly return 2Standard deviation 25298WorkingThe above excel with See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

CAPM andexpected? returns..a.??Given the following? holding-periodreturns, compute the average returns and the standard deviationsfor the Zemin Corporation and for the market.b.??If? Zemin's beta is 1.88 and the? risk-freerate is 7 percent, what would be an expected return for an investorowning? Zemin? ?(Note: Because the preceding returns are based on monthly? data,you will need to annualize the returns to make them comparable withthe? risk-free rate. For? simplicity, you can convert from monthlyto yearly returns by multiplying the average monthly returns by?12.)c.??How does? Zemin's historical average returncompare with the return you believe you should expect based on thecapital asset pricing model and the? firm's systematic? risk?MonthZemin Corp.Market18%6%24%1%30%1%4-1%-1%56%4%62%1%

Month	Zemin Corp.	Market
1	8%	6%
2	4%	1%
3	0%	1%
4	-1%	-1%
5	6%	4%
6	2%	1%