1. Compute the abnormalrates of return for the following stocks during period t (ignore differential systematicrisk):
Stock Rit Rmt
B 11.5% 4.0%
F 10.0 8.5
T 14.0 9.6
C 12.0 15.3
E 15.9 12.4
Rit = return for stock i during period t
Rmt =

Calculate the abnormal return of Stock Z if the market price is $13.68, the risk-free rate is 4 percent, the return on the market portfolio is 10 percent, and the beta of Stock Z is 0.95. Stock Z paid a $0.75 dividend and has an expected growth rate of 4 percent. Please interpret your results.

1. The stock of Eastman Kodak has an estimated beta of 1.6. How would you interpret this beta value? How would you evaluate the firm's systematicrisk.
2. The stock of Apple, Inc, has an estimated beta of 1.5. The current risk free rate is 5% and the market return is 7.4%. What is the required rate of return on he stock?

1. Suppose the market can be described by the following three sources of systematicrisk with associated risk premiums.
Factor Risk Premium
Industrial production (I) 7%
Interest rates ( R) 3
Consumer confidence ( C) 5
The return on a particular stock is generated according to the following equation:

Discuss the measure of total risk and compare systematicrisk to nonsystematicrisk. Also discuss why systematicrisk is the relevant risk rather than total risk.
Discuss the distinction between a firm's unlevered beta and its levered beta.
Discuss tactics that a company might use to limit foreign exchange risk.

For an organization owning multiple assets where their core business is not real estate is CAPM recommended to use or not for measurement as a good indicator of an assets performance? Why or why not?
How do,
- Risk-free rate of return
- Beta (as a riskmeasure)
- Expected market risk premium
affect this?

AKA's stock is currently selling for $11.44. This year the firm had earnings per share of $2.80 and the current dividend is $0.68. Earnings are expected to grow 7% a year in the foreseeable future. The risk-free rate is 10 percent and the expected market return is 14.2 percent. What will be the effect on the price of AKAs' stock

Please state your why you selected the answer so I can better understand.
1. A statistical measure of the degree of correlation between two quantitative variables is called:
j. correlation
k. covariance
l. correlation coefficient
m. beta
2. Which of the following best illustrates a formal model of the relatio