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23. A company's stock has a beta of 1.2, and its return R₁,t has the following structure: R₁t 1.2RM,t + €1,t. The stock price was $100 in year 0. The following year, the company was sued for fabricating its financial statements. In response, its stock price fell to $60, and no dividend was paid. In the same year, the market return was 5%. Find the amount of return attributable to the company-specific news (lawsuit).

23. A company's stock has a beta of 1.2, and its return R₁,t has the following structure: R₁t 1.2RM,t + €1,t. The stock price was $100 in year 0. The following year, the company was sued for fabricating its financial statements. In response, its stock price fell to $60, and no dividend was paid. In the same year, the market return was 5%. Find the amount of return attributable to the company-specific news (lawsuit).

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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23. A company's stock has a beta of 1.2, and its return R₁,t has the following structure: R₁t 1.2RM,t + €1,t. The stock price was $100 in year 0. The following year, the company was sued for fabricating its financial statements. In response, its stock price fell to $60, and no dividend was paid. In the same year, the market return was 5%. Find the amount of return attributable to the company-specific news (lawsuit).
Transcribed Image Text:23. A company's stock has a beta of 1.2, and its return R₁,t has the following structure: R₁t 1.2RM,t + €1,t. The stock price was $100 in year 0. The following year, the company was sued for fabricating its financial statements. In response, its stock price fell to $60, and no dividend was paid. In the same year, the market return was 5%. Find the amount of return attributable to the company-specific news (lawsuit).
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