FB has a beta of 1.2 and a realized return of 15.5%. what is FBs alpha...

Question

Question

FB has a beta of 1.2 and a realized return of 15.5%. what is FBs alpha if the market risk premium is 14.9% and the risk free rate is 2.3%?

business finance

Answer 1

Answer #1

Expected Return = Risk-free Rate + Beta * Market Risk Premium
Expected Return = 2.30% + 1.20 * 14.90%
Expected Return = 20.18%

Alpha = Realized Return - Expected Return
Alpha = 15.50% - 20.18%
Alpha = -4.68%

Answer 2

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