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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.

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Solution Summary

Calculate the abnormal return in the case.

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Jayant Kumar, MBA
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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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