FIN415 Risk Measurement Summary

FIN415 Risk Measurement Summary - Risk Measurement Summary...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Risk Measurement Summary 1 Risk Measurement Summary Corporate Risk Management FIN415 6-10. (Measuring risk and rates of return) 1. Given the holding-period returns shown, compute the average returns and the standard deviations for Zemin Corporation and for the market. Month Zemin Corp. Market 1 6% 4% 2 3 2 3 –1 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Risk Measurement Summary 2 4 –3 –2 5 5 2 6 0 2 Zemin Corp Market Average Rate of Return: 6% + 3% - 1% - 3% + 5% + 0% Average Rate of Return: 4% + 2% + 1% - 2% + 2% + 2% 6 6 10% 9% 6 6 1.67% 1.50% Standard Deviation: (6% - 1.67%) 2 Standard Deviation: (4% - 1.50%) 2 (3% - 1.67%) 2 (2% - 1.50%) 2 (-1% - 1.67%) 2 (1% - 1.50%) 2 (-3% - 1.67%) 2 (-2% - 1.50%) 2 (5% - 1.67%) 2 (2% - 1.50%) 2 (0% - 1.67%) 2 (2% - 1.50%) 2 (6 - 1) (6 - 1) 3.56% 1.97% 2. If Zemin’s beta is 1.54 and the risk-free rate is 8 percent, what would be an appropriate required return for an investor owning Zemin? ( Note : Because the returns of Zemin Corporation are based on monthly data, you will need to annualize the returns to make them compatible with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

FIN415 Risk Measurement Summary - Risk Measurement Summary...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online