Exhibit 5-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 37

Multiple Choice

Exhibit 5-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{ccccc}\text { Stock } & \mathrm{R}_{\text {it }} & \mathrm{R}_{\text {mt }} & \mathrm{a}_{\mathrm{i}} & \text { Beta } \\\hline \mathrm{A} & 10.6 & 15 & 0 & 0.8 \\\mathrm{Z} & 9.8 & 8.0 & 0 & 1.1\end{array}$
R_it = return for stock i during period t
R_mt = return for the aggregate market during period t
-Refer to Exhibit 5-5. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk) ?

• A) 3.40
• B) 4.40
• C) -1.86
• D) -4.40
• E) -1.70

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Definitions:

Seller's Price

The price at which a seller is willing to sell a good or service, often influenced by production costs, market demand, and competitive pricing.

Competitive Market

A market structure characterized by a large number of sellers and buyers, where no single entity can dictate the price or terms of products.

Pricing Constraint

Limitations or regulations affecting the determination of a product's price, including factors like cost, competition, and regulatory environment.

Consumer Demand

The desire of buyers for goods and services, influencing the quantity that the market can sell at a certain price.