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.