quarter 1992 earnings rose 6.2 percent to $1.34 billion, or $1.57 a share, setting a new record and bringing the earnings for 1992 to $4.73 billion, or $5.51 a share. After adjust- ing for non-recurring items, 1992 earnings from continuing operations were up about 10 percent from the previous year. The Journal also reported that forecasts made by analysts averaged $1.61 per share for the fourth quarter of 1992, and from $5.50 to $5.60 per share for the whole year. One analyst was quoted as saying that 1992 "wasn't a bad year for GE" despite the downturn n the stock market on the day of the earnings announcement. Yet, on the same day the fourth-quarter earnings were announced, General Electric Co.s stock price fell $1.50 to $82.625 on the New York Stock Exchange. Required b. Use the Sharpe-Lintner CAPM (Equations 4.2 and 4.3) to explain how the new informa- tion caused the current price to fall. Calculations are not required.
quarter 1992 earnings rose 6.2 percent to $1.34 billion, or $1.57 a share, setting a new record and bringing the earnings for 1992 to $4.73 billion, or $5.51 a share. After adjust- ing for non-recurring items, 1992 earnings from continuing operations were up about 10 percent from the previous year. The Journal also reported that forecasts made by analysts averaged $1.61 per share for the fourth quarter of 1992, and from $5.50 to $5.60 per share for the whole year. One analyst was quoted as saying that 1992 "wasn't a bad year for GE" despite the downturn n the stock market on the day of the earnings announcement. Yet, on the same day the fourth-quarter earnings were announced, General Electric Co.s stock price fell $1.50 to $82.625 on the New York Stock Exchange. Required b. Use the Sharpe-Lintner CAPM (Equations 4.2 and 4.3) to explain how the new informa- tion caused the current price to fall. Calculations are not required.
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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Transcribed Image Text:5. On January 21, 1993, The Wall Street Journal reported that General Electric Co.'s fourth-
quarter 1992 earnings rose 6.2 percent to $1.34 billion, or $1.57 a share, setting a new
record and bringing the earnings for 1992 to $4.73 billion, or $5.51 a share. After adjust-
ing for non-recurring items, 1992 earnings from continuing operations were up about 10
percent from the previous year.
The Journal also reported that forecasts made by analysts averaged $1.61 per share for
the fourth quarter of 1992, and from $5.50 to $5.60 per share for the whole year. One
analyst was quoted as saying that 1992 "wasn't a bad year for GE" despite the downturn
in the stock market on the day of the earnings announcement.
Yet, on the same day the fourth-quarter earnings were announced, General Electric
Co.'s stock price fell $1.50 to $82.625 on the New York Stock Exchange.
Required
b. Use the Sharpe-Lintner CAPM (Equations 4.2 and 4.3) to explain how the new informa-
tion caused the current price to fall. Calculations are not required.
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