Using the Single Index Model, What Is the Alpha of a Stock

question 26

Multiple Choice

Using the single index model, what is the alpha of a stock with beta of 1.2, a market return of 14%, risk free rate of 3% and the actual return of the stock is 18%?

• A) −1.37%
• B) 0.75%
• C) 1.80%
• D) 2.11%
• E) −3.12%

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Definitions:

Conversation

A form of interactive, spontaneous communication between two or more parties.

Nonverbal Communication

The process of conveying a message without the use of words, through body language, facial expressions, and gestures.

Personal Space

The physical area surrounding an individual that they consider their own, into which others cannot intrude without causing discomfort.

Eye Contact

The act of two people looking directly into each other's eyes, which can communicate various emotions and intentions.