Before the start of trading on the morning of November 17, Sears and Kmart announced that Kmart would be taking over Sears. • Sears' stock price was $45.20/share at the end of the day on November 16, and $52.99/share at the end of the day on November 17. The beta of Sears stock is 0.614. The return on the market portfolio of risky assets was 0.78 percent on November 17. Sears paid no dividends on November 16 or November 17. Assume the riskless rate is zero and that the alpha of Sears stock is zero. Assume no other news came out about Sears or Kmart on November 16 and November 17. Question: Of the change in Sears' stock price from $45.20/share to $52.99/share, what dollar amount was due to the announcement?

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
icon
Related questions
Question
Before the start of trading on the morning of November 17, Sears and Kmart announced that Kmart would be taking
over Sears. • Sears' stock price was $45.20/share at the end of the day on November 16, and $52.99/share at the end of
the day on November 17.. The beta of Sears stock is 0.614. The return on the market portfolio of risky assets was 0.78
percent on November 17. Sears paid no dividends on November 16 or November 17. Assume the riskless rate is zero
and that the alpha of Sears stock is zero.. Assume no other news came out about Sears or Kmart on November 16 and
November 17. Question: Of the change in Sears' stock price from $45.20/share to $52.99/share, what dollar amount
was due to the announcement?
Transcribed Image Text:Before the start of trading on the morning of November 17, Sears and Kmart announced that Kmart would be taking over Sears. • Sears' stock price was $45.20/share at the end of the day on November 16, and $52.99/share at the end of the day on November 17.. The beta of Sears stock is 0.614. The return on the market portfolio of risky assets was 0.78 percent on November 17. Sears paid no dividends on November 16 or November 17. Assume the riskless rate is zero and that the alpha of Sears stock is zero.. Assume no other news came out about Sears or Kmart on November 16 and November 17. Question: Of the change in Sears' stock price from $45.20/share to $52.99/share, what dollar amount was due to the announcement?
Expert Solution
steps

Step by step

Solved in 3 steps with 3 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education