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

question 65

Multiple Choice

Using the single index model, what is the alpha of a stock with beta of 1.3, a market return of 14%, risk free rate of 4% and the actual return of the stock is 14%?

• A) −1.37%
• B) 0.75%
• C) 1.80%
• D) 2.11%
• E) −3.00%

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Definitions:

Objective Attributes

Observable and measurable product features that can influence consumer decisions, such as price, quality, and functionality.

Buyer-seller Relationships

The ongoing interactions and engagements between buyers and sellers, which can influence the buyer's satisfaction, loyalty, and repeat purchase behavior.

Lengthy Negotiations

Extended discussions and bargaining processes between parties with the goal of reaching an agreement on particular terms or conditions.

Delivery Schedules

Timetables established by suppliers for the delivery of products or services to customers.