Intro You've analyzed IBM's stock and expect it to deliver a return of 12% over the next year. The stock has a beta of 0.8. The risk-free rate is 2.5% and the expected market risk premium is 4.5%. Attempt 1/5 for 10 pts. Part 1 What is the security's expected alpha? .059 Correct Note that the market risk premium of 4.5% is net of the risk-free rate, by definition of a risk premium: E(r)CAPM = rf + B(E(rm) rf) = 0.025 + 0.8.0.045 = 0.061 a = E(r)security analysis - E(T)CAPM = 0.12 0.061 = 0.059 Part 2 - Attempt 2/5 for 9 pts. What is the security's expected alpha in equilibrium according to the CAPM? 0+ decimals Previous answers: .025 Submit