(Related to Checkpoint 8.3)(CAPM and expected returns)

MonthSugita Corp.Market 12.2%1.8% 20.0%2.0% 30.0%1.0% 40.0%0.0% 56.0%6.0% 66.0%2.0%

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 1.85 and the risk-free rate is 9 percent, what would be an expected 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 should expect based on the Capital Asset Pricing Model and the firm's systematic risk?

a.Given the holding-period returns shown in the table, the average monthly return for the Sugita Corporation is ? ( round three decimals)

The standard deviation for the Sugita Corporation is?

Given the holding-period returns shown in the table, the average monthly return for the market is ?

The standard deviation for the market is ?

b. If Sugita's beta is 1.85 and the risk-free rate is 9 percent, the expected return for an investor owning Sugita is

The average annual historical return for Sugita is ?

C. How does Sugita's historical average return compare with the return you should expect based on the capital asset pricing model and the firm's systematic risk?

Sugita's historical average return is ( less than or greater than) the return based on the capital asset pricing model and the firm's systematic risk.