Analysis of Past Monthly Movements in IBM's Stock Price Produces

question 1

Multiple Choice

Analysis of past monthly movements in IBM's stock price produces the following estimates: α = 2.5 percent and β = 1.6. If the market index subsequently rises by 12 percent in one month and IBM's stock price increases by 20 percent, what is the abnormal change in IBM's stock price?

• A)+1.7 percent
• B)+8 percent
• C)−1.7 percent
• D)+2.5 percent

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