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You consider buying a share of stock at a price of $26.50. The stock is expected to pay a dividend of $1.75 next year and
You consider buying a share of stock at a price of $26.50. The stock is expected to pay a dividend of $1.75 next year and your advisory service tells you that you can expect to sell the stock in one year for $29. The stock's beta is 1.2, the risk-free rate is 5% and the expected return on the market is 14%. What is the stock's abnormal return or alpha?
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