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QuesLIUI 17 14 PUNILS) Javcu At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.2 and the risk-free rate was
QuesLIUI 17 14 PUNILS) Javcu At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.2 and the risk-free rate was about 2.0%. Apple's price was $ 81.78. Apple's price at the end of 2007 was $ 193.24 and it did not pay any dividends during this period. You also estimate the market risk premium to have been 6.0% during this period. a. What was Apple's expected return during this period according to the CAPM? b. What was Apple's realized (i.e. actual) return during this period? C. Compute the difference between Apple's realized return and it's expected return according to the CAPM (i.e. b. - a.). *This difference is commonly known as "Jensen's Alpha" or just "Alpha". d. If the CAPM holds, what should the difference between stocks' realized returns and their expected returns according to the CAPM (i.e. their Alpha) be on average? Provide a typed answer to the question showing your work (formulas with inputs and/or explanations)
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