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# abnormal rates of return

1. Compute the abnormal rates of return for the following stocks during period t (ignore differential systematic risk):

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 for the aggregate market during period t

2. Compute the abnormal rates of return for the five stocks in Problem 1 assuming the following systematic risk measure (betas):

Stock                     Bi

B                             0.95

F                              1.25

T                              1.45

C                             0.70

E                              -0.30