Security A has an expected rate of return of 0.10 and a beta of 1.3. The market expected rate of return is 0.10, and the risk-free rate is 0.04. The alpha of the stock is
A. 1.7%.
B. –1.8%.
C. 8.3%.
D. 5.5%.
B. –1.8%.
10% – [4% + 1.3(10% – 4%)] = –1.8%.
You might also like to view...
The account Allowance to Adjust Short-Term Investments to Market appears as a contra account on the income statement
Indicate whether the statement is true or false
A ________ represents the width of the confidence interval between a sample mean and its upper limit or between a sample mean and its lower limit
A) margin of error B) confidence level C) significance level D) confidence interval
Use the following information to calculate cash paid for income taxes: Income tax expense$46,000?Income tax payable, January 1 10,000?Income tax payable, December 31 11,400?
A. $44,600. B. $24,600. C. $56,000. D. $46,000. E. $57,400.
Based on the period of 1926-2015, the risk premium for small-company stocks averaged:
A. 15.0 percent. B. 17.4 percent. C. 13.9 percent. D. 12.3 percent. E. 16.8 percent.