Exhibit 64
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 34

Multiple Choice

Exhibit 6.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \mathbf { R } _ { \text {it } } & \mathbf { R } _ { \text {mt } } & \mathbf { a } _ { \mathbf { i } } & \text { Beta } \\\hline \mathrm { A } & 10.3 & 12 & 0 & 0.6 \\\mathrm {~B} & 9.4 & 9.0 & 0 & 1.2\end{array}$$ R_it = return for stock i during period t
R_mt = return for the aggregate market during period t
-Refer to Exhibit 6.4. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk) ?

• A)3.34
• B)1.75
• C)-1.75
• D)-3.70
• E)-1.70

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Definitions:

Empirical Validity

The extent to which a theoretical concept is supported by real-world evidence or data.

Information Processing

The acquisition, recording, organization, retrieval, display, and dissemination of information.

True Probabilities

The actual likelihood of all possible outcomes of a random event, often contrasted with estimated probabilities based on models or historical data.

Rates Of Return

The gains from an investment over a specific period, often measured as a percentage of the investment's initial cost. This represents the profitability of an investment.