Question
1. The following table shows the results of estimating the stock characteristic line of ABC Co. Here, the S&P 500 was used as the market
1. The following table shows the results of estimating the stock characteristic line of ABC Co. Here, the S&P 500 was used as the market index.
a. What are the alpha and beta's estimates of the expected return on ABC Co, respectively? Each statistically Can you be sure that it is significantly different from zero? However, the unit of the coefficient value of the intercept is %.
b. Can it be seen that the expected rate of return of ABC Co. is more sensitive than the expected rate of market rate of return? Is this statistically significant?
c. Draw the security characteristic line of ABC Co. and plot alpha and beta on the graph.
d. If the alpha and beta shown in the table above are assumed to be statistically significant, the expected return of the S&P 500 If the rate is 8%, what would be the expected rate of return for ABC Co? (the risk-free interest rate is known to be 2%.)
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