MONTH ZEMIN CORP. MARKET 1 7% 4% 2 2% 1% 3 2% 2% 4 -3% -1% 5 4% 2% 6 2%...

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Finance

MONTH ZEMIN CORP. MARKET
1 7% 4%
2 2% 1%
3 2% 2%
4 -3% -1%
5 4% 2%
6 2% 3%
a. Given the? holding-period returns shown above, compute theaverage returns and the standard deviations for the ZeminCorporation and for the market.
b. If? Zemin's beta is 1.04 and the? risk-free rate is 9?percent, what would be an appropriate required return for aninvestor owning? Zemin? ?(?Note: Because the returns of ZeminCorporation are based on monthly? data, you will need to annualizethe returns to make them compatible with the? risk-free rate. For?simplicity, you can convert from monthly to yearly returns bymultiplying the average monthly returns by? 12.)
c. How does? Zemin's historical average return compare with thereturn you believe to be a fair? return, given the? firm'ssystematic? risk?
a. The average monthly return for the Zemin Corporation is__%. ?(Round to two decimal? places.)
The average monthly return for the market is %. ?(Round totwo decimal? places.)
The standard deviation for the Zemin Corporation is ?%.?(Round to two decimal? places.)
The standard deviation for the market is %. ?(Round to twodecimal? places.)
b. If? Zemin's beta is 1.04 and the? risk-free rate is 9?percent, an appropriate required return for an investor owningZemin would be _%. ?(Round to two decimal? places.)
c. Given the? stock's systematic? risk, Zemin's historicalreturn is ____ what we would consider a fair return.

Answer & Explanation Solved by verified expert

3.6 Ratings (691 Votes)

ACalculation of average returnMonthZemin Corp in MonthMarrket return171422213232434154526263Averagereturn Using average function in M S See Answer

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Transcribed Image Text

MONTH ZEMIN CORP. MARKET1 7% 4%2 2% 1%3 2% 2%4 -3% -1%5 4% 2%6 2% 3%a. Given the? holding-period returns shown above, compute theaverage returns and the standard deviations for the ZeminCorporation and for the market.b. If? Zemin's beta is 1.04 and the? risk-free rate is 9?percent, what would be an appropriate required return for aninvestor owning? Zemin? ?(?Note: Because the returns of ZeminCorporation are based on monthly? data, you will need to annualizethe returns to make them compatible with the? risk-free rate. For?simplicity, you can convert from monthly to yearly returns bymultiplying the average monthly returns by? 12.)c. How does? Zemin's historical average return compare with thereturn you believe to be a fair? return, given the? firm'ssystematic? risk?a. The average monthly return for the Zemin Corporation is____%. ?(Round to two decimal? places.)The average monthly return for the market is ____%. ?(Round totwo decimal? places.)The standard deviation for the Zemin Corporation is ____?%.?(Round to two decimal? places.)The standard deviation for the market is ____%. ?(Round to twodecimal? places.)b. If? Zemin's beta is 1.04 and the? risk-free rate is 9?percent, an appropriate required return for an investor owningZemin would be _____%. ?(Round to two decimal? places.)c. Given the? stock's systematic? risk, Zemin's historicalreturn is ______ what we would consider a fair return.