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The table below shows the returns for the market, SOLAR Ltd., FOSSIL Ltd., and NUCLEAR Ltd. shares over a 3-day period. The beta of SOLAR
The table below shows the returns for the market, SOLAR Ltd., FOSSIL Ltd., and NUCLEAR Ltd. shares over a 3-day period. The beta of SOLAR is 1.2, the beta of FOSSIL is 0.95 , and the beta of NUCLEAR is 1.1. The risk-free rate is 0.1% per day. a) For each of the shares, calculate the expected return according to the CAPM, and the abnormal return for each of the days. (7.5 Marks) b) Calculate the Cumulative Average Abnormal return for these companies over the 3-day period, assuming an equally weighted portfolio. (2.5 marks)
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