1. Use the following for questions 1 through 5.

   Stock A has a market beta of 1.5, and stock B has a market beta of 0.8.

   The market realizes a return of 2% over a the last 5 days. Assume the risk-free rate is negligible over this short time period.

   What is the expected return of stock A over the same period predicted by the stock's market sensitivity? (in %)

QUESTION 2

1. If stock A instead realized a return of 2.5%, what is the alpha of stock A over that period? (in %)

QUESTION 3

1. The answer to problem 2 implies that the daily alpha of the stock is -0.1% over this period. If on one of the days, the market went up 1% and the stock went up 1% on the same day, what was the firm specific surprise that day? (in %)

QUESTION 4

1. If the market realizes a return of -1% over a certain period: What is the expected return of stock B over the same period predicted by the stock's market sensitivity? (in %)

QUESTION 5

1. If stock B realized a return of 1% over the same period that the market realized a -1% return, what is the alpha of stock B over that period? (in %)