Using the index model, the alpha of a stock is 3%, the beta is 1.1, and the market return is 10%. What is the residual given an actual return of 15%?
A).0%
B) 1%
C) 2%
D) 3%

Name: Using the index model, the alpha of a stock is 3%, the beta is 1.1, and the market return is 10%. What is the residual given an actual return of 15%? A).0% B) 1% C) 2% D) 3%
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Quizplus · Accepted Answer

Residual = 15 - (3 + 1.1 × 10) = 1%

Using the Index Model, the Alpha of a Stock Is