Question 1. The PanFries Company just announced a new model of their cooker, which will reduce cooking time and fat absorption. The daily returns on PanFries stock (Rpf), T-Bills (r) and on a diversified market portfolio (Rm), are listed in the following table: Daily returns (%) Day Rpf r RM -3 .45 .012 .50 -2 .18 .010 .17 -1 -27 .009 -.33 0 1.54 .010 .41 1 -0.07 .011 -.08 2 -.32 .009 -29 3 .18 .010 .17 The CAPM beta for PanFries is 1.2. (a) (4 points) Calculate the abnormal (or unexpected) return on PanFries stock relative to its expected return as predicted by CAPM, and hence the cumulative abnormal return. (b) (4 points) Explain the behavior of the stock price