Question
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Risk Premium Industrial production(I) 6
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums.
| Factor | Risk Premium |
| Industrial production(I) | 6 % |
| Interest rates (R) | 3 |
| Consumer confidence(C) | 5 |
The return on a particular stock is generated according to the following equation:
r= 12 % +0.6 I +0.4R+0.8C +e
If the t-bill rate is 3 %, calculate alpha.
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Cornerstones of Financial and Managerial Accounting
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
2nd edition
978-1111879044
