ookmarks Develop Window Help tamu.blackboard.com Week 10- 18 SPRING AGEC 435 701

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ookmarks Develop Window Help tamu.blackboard.com Week 10- 18 SPRING AGEC 435 701: F.. Take Tes Howdy emaining Time: 19 minutes, 59 seconds. uestion Completion Status: QUESTION 10 1 p John purchased a stock that has a beta of 1.2, a standard deviation of 13%, and returned 16% this year. The market's return was 12% with a standard deviation of 14%. If the risk free rate of return is 3%, what is the alpha of John's stock? 2.2. 1.4 2.2. Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers Close Window

Explanation / Answer

Alpha of the stock =Rate of return-[risk free return+Beta (Market rate of return -risk free rate of return)] Alpha of the John stock =16-[3+1.2(12-3)] =2.2

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