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The average return of a broad-based market index, the Wilshire 5000, is 11%. We determine by the index model by using this index that ZZZ's
The average return of a broad-based market index, the Wilshire 5000, is 11%. We determine by the index model by using this index that ZZZ's sensitivity to the market index is 0.9. Risk-free 90-day T-bills yield 2%. (a) What is the expected return of this stock? (b) In your scratch work, draw the SML, labelling the (i) axes, (ii) the stock's expected return, (iii) the market's expected return, and (iv) the stock's alpha if the stock's actual return is 12%. IF using, Excel, please show work.
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