Exhibit 6.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c }
\text { Stock } & \mathbf { R } _ { \text {it } } & \mathbf { R } _ { \text {mt } } & \mathbf { a } _ { \mathbf { i } } & \text { Beta } \
\hline \mathrm { C } & 12 & 10 & 0 & 0.8 \
\mathrm { E } & 10 & 8.0 & 0 & 1.1
\end{array}$$ R it = return for stock i during period t
R mt = return for the aggregate market during period t
-Refer to Exhibit 6.1. What is the abnormal rate of return for Stock C during period t using only the aggregate market return (ignore differential systematic risk)?
A)4.0%
B)1.2%
C)-1.05%
D)2.0%
E)-8.50

Question

Exhibit 6.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } 
\text { Stock } & \mathbf { R } _ { \text {it } } & \mathbf { R } _ { \text {mt } } & \mathbf { a } _ { \mathbf { i } } & \text { Beta } \
\hline \mathrm { C } & 12 & 10 & 0 & 0.8 \
\mathrm { E } & 10 & 8.0 & 0 & 1.1
\end{array}$$ R it = return for stock i during period t
R mt = return for the aggregate market during period t
-Refer to Exhibit 6.1. What is the abnormal rate of return for Stock C during period t using only the aggregate market return (ignore differential systematic risk)?
A)4.0%
B)1.2%
C)-1.05%
D)2.0%
E)-8.50

Quizplus · Accepted Answer

The abnormal return is calculated as the actual return minus the expected return based on the market return and beta. For Stock C, the expected return is 0.8 * 10 = 8%. The abnormal return is 12% - 8% = 4%.

Exhibit 61 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Exhibit 61
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)