Using the Index Model, the Alpha of a Stock Is

question 79

Multiple Choice

Using the index model, the alpha of a stock is 3%, the beta is 1.1, and the market return is 10%. What is the residual given an actual return of 15%?

• A).0%
• B) 1%
• C) 2%
• D) 3%

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Definitions:

Cost Allocated

The amount of indirect costs assigned to cost objects based on certain criteria or cost drivers.

Assembly Department

A section within a manufacturing process where pieces are put together to form a component or a finished product.

Fixed Overhead Rate

A consistent charge that does not fluctuate with the level of output or activity in a given period, used to allocate fixed costs to units of output.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and overhead) in the cost of a product.