Question

Last year you invested in a stock with a beta equal to 0.76. The risk-free rate...

Last year you invested in a stock with a beta equal to 0.76. The risk-free rate was 0.016 and the expected return of the market was 0.19. After holding the stock for the year you find that the market did return what was expected. However, the stock you invested in returned 0.16. By how much did the stock over-perform (under-perform) for the year? Answer as a percentage to two decimals

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

114 ДА В Risk free rate Market rate of return Beta of stock Expected return of stock 1.60% 19.00% 76.00% 14.82% Actual Return

Cell reference -

А B Risk free rate Market rate of return Beta of stock Expected return of stock 0.016 0.19 0.76 =C2+C4*(C3-C2) mooo Actual Re

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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