Security A has an expected rate of return of 12% and a beta of 1.1. The market expected rate of return is 8%, and the risk-free rate is 5%. The alpha of the stock is ________.
A) -1.7%
B) 3.7%
C) 5.5%
D) 8.7%

Name: Security A has an expected rate of return of 12% and a beta of 1.1. The market expected rate of return is 8%, and the risk-free rate is 5%. The alpha of the stock is ________. A) -1.7% B) 3.7% C) 5.5% D) 8.7%
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Question

Quizplus · Accepted Answer

α = .12 - [.05 + 1.1(.08 - .05)] = .037

Security a Has an Expected Rate of Return of 12