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?
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
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 3 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
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…
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