Question
1. Security A has an expected rate of return of 15.25% and a beta of 1.75.The riskfree rate is 2.50% and the market risk premium
1. Security A has an expected rate of return of 15.25% and a beta of 1.75.The riskfree rate is 2.50% and the market risk premium is 6.50%.What is the alpha of security A? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.
2. The risk-free rate is 3 percent. The expected market rate of return is 12.75 percent. You expect a stock with a beta of 1.25 to offer a rate of return of 14.50 percent. According to CAPM, what is the stock's alpha? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started