Required return for an investor owning abc


Problem: See the table below for computing the average returns and the standard deviation for ABC Corp and the market.

Month    ABC Corp    Market
1                6%           4%
2                3              2
3               -1              1
4               -3             -2
5                5              2
6                0              2

Q1. If ABC's beta is 1.54 and the risk free rate is 8% what would be the appropriate required return for an investor owning ABC.

Q2. How does the ABCs historical return compare with the return you believe to be a fair return, given the organizations systematic risk.

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Finance Basics: Required return for an investor owning abc
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