Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.53 and an alpha of –0.28% per month. A month later, the market is up by 5.8%, and United Futon is up by 6.8%. What is Futon’s abnormal rate of return?

Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.53 and an alpha of –0.28% per month. A month later, the market is up by 5.8%, and United Futon is up by 6.8%. What is Futon’s abnormal rate of return?

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

Problem 1PS

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Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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