Answered: Expected Return on the market HPR Beta…

Expected Return on the market HPR Beta Risk-free rate Stock ABC 15.68% 1.2 1% 6.68% What is the alpha for stock ABC? Answer as a percent. Show work.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 3Q

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

Expected Return on
the market
HPR
Beta
Risk-free rate
Stock ABC
15.68%
1.2
1%
6.68%
What is the alpha for stock ABC?
Answer as a percent. Show work.

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