USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
R it = return for stock i during period t
R mt = return for the aggregate market during period t
-Refer to Exhibit 5.1. What is the abnormal rate of return for Stock C when you consider its systematic risk measure (beta)?
A) 4.0 percent
B) 1.2 percent
C) 2.0 percent
D) -1.05 percent
E) -8.5 percent

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  R it = return for stock i during period t
R mt = return for the aggregate market during period t
-Refer to Exhibit 5.1. What is the abnormal rate of return for Stock C when you consider its systematic risk measure (beta)?
A) 4.0 percent 
B) 1.2 percent 
C) 2.0 percent 
D) -1.05 percent 
E) -8.5 percent

Quizplus · Accepted Answer

The abnormal rate of return, also known as alpha, measures the difference between a stock's actual return and its expected return based on its beta (systematic risk measure). Without specific numbers or a formula provided in the question, the correct answer cannot be determined through calculation. However, given the options, A) 4.0 percent is the only one that presents a straightforward percentage, which could represent an abnormal rate of return in a typical scenario. The other options either provide a nonsensical answer or are formatted in a way that doesn't represent a typical answer for abnormal return calculations.