Problem 5 Intro You've analyzed IBM's stock and expect it to deliver a return of 10% over the next year. The stock has a beta of 0.5. The risk-free rate is 2.5% and the expected market risk premium is 4.5%. - Attempt 1/3 for 10 pts. Part 1 What is the security's expected alpha? 5.25% Correct Note that the market risk premium of 4.5% is net of the risk-free rate, by definition of a risk premium: E(T)CAPM = rf + B(E(rm) rf) = 0.025 + 0.5 0.045 = 0.0475 a = - E(r)security analysis E(r)CAPM = 0.1 0.0475 = 0.0525 Part 2 | Attempt 1/3 for 10 pts. What is the security's expected alpha according to the CAPM? (In other words, assume the CAPM is true and report what alpha you would expect.) 0+ decimals Submit