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Security A has a realized rate of return of 12% and a beta of 1.1. The market expected rate of return is 8%, and the
Security A has a realized rate of return of 12% and a beta of 1.1. The market expected rate of return is 8%, and the risk-free rate is 5%. The alpha of the stock is A. -1.7% B. 3.7% C. 5.5% D. 8.7% You consider buying a share of stock at a price of $25. The stock is expected to pay a dividend of $1.50 next year, and your advisory service tells you that you can expect to sell the stock at the end of the year for $28. The stock's beta is 1.1, rf = 6% , and Erm= 16%. What is the stock's abnormal return? A. 1% B. 2% C. -1% D. -2%
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