You are considering buying a share of stock at a price of $73. The stock is expected to pay a dividendof $4.75 next year, and your advisory service tells you that you can expect to sell the stock in 1 yearfor $79. The stock's beta is 1.5, r, is 4%, and E[m] = 12%. What is the stock's alpha (abnormalreturn)?O 2.33%-2.33%O 1.27%O 1.00%O-1.27%▷

Answer : Abnormal return : Abnormal return = Required rate of return - return expected to be earned…

Answered: = $4.75 next year, and your advisory…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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= $4.75 next year, and your advisory service tells you -$79. The stock's beta is 1.5, r, is 4%, and Elrml - 13 zurn)? 2.33%