Suppose the market risk premium is expected to be 8%, a stock has a beta of 1.16, and the T-bill rate is 3%. An analyst believes the stock will provide a return of 15%. Using the CAPM, what would be the stock's alpha? Enter your answer as a decimal with three digits (e.g., 0.123, not 12.3%)

Suppose the market risk premium is expected to be 8%, a stock has a beta of 1.16, and the T-bill rate is 3%. An analyst believes the stock will provide a return of 15%. Using the CAPM, what would be the stock's alpha? Enter your answer as a decimal with three digits (e.g., 0.123, not 12.3%)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

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Suppose the market risk premium is expected to be 8%, a stock has a beta of 1.16, and the T-bill rate is 3%. An analyst
believes the stock will provide a return of 15%. Using the CAPM, what would be the stock's alpha? Enter your answer as a
decimal with three digits (e.g., 0.123, not 12.3%)

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