ABC Companys stock earned a return of 10% this past year. Investors required return for this stock

Question:

ABC Company’s stock earned a return of 10% this past year. Investors’ required return for this stock based on the SML equation was 9%. Where would this stock plot on the SML? What can you say about this investment’s alpha? Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals of Financial Management

ISBN: 978-1337395250

15th edition

Authors: Eugene F. Brigham, Joel F. Houston

See More Books

Question Posted: Jan 05, 2019 12:08 PM

See More Questions

You are given the following information concerning several mutual funds: During the time period the Standard & Poor's stock index exceeded the Treasury bill rate by 10.5 percent (i.e., rm - rf =...
a. Given the following, determine the firms optimal capital structure: b. If the firm were using 60 percent debt and 40 percent equity, what would that tell you about the firms use of financial...
Carla is the CEO of The Superior Sausage Company (a Canadian firm, listed on the Toronto Stock Exchange) and believes that the best way for the company to grow is through acquisitions. She has...
The trial balance for Hanna Resort Limited on August 31 is as follows: Additional information: 1. The balance in Prepaid Insurance includes the cost of four months premiums for an insurance policy...
You are provided with the following income accounts of Oakridge Ltd. for the year ended December 31, 2014. Oakridge reported profit from operations of $125,000 for the year ended December 31, 2014....
ABC Inc. currently has debt of $75 million and equity of $25 million for a total value (i.e. value of the levered firm, VL) of $100 million. The firm's cost of debt is 4% and it pays a corporate tax...
Calculate the volatility and the current price of oil futures implied by the call 1600 August and the call 1700 August of Figure 19.8 by using the Black-Scholes formula with $T=.25$. OIL CRUDE OIL...
Yankee Co.'s property, plant, and equipment and accumulated depreciation and amortization balances at December 31, Year 4, are Asset Cost Accumulated Depreciation Land $ 275,000 -- Buildings...
How do cognitive biases influence the perception and resolution of conflicts, and what cognitive restructuring methods can be utilized to mitigate their impact?
Jim Jones is a sole proprietor that owns and manages a music store that sells music CDs and DVD music videos. Conduct research into firms chart of account coding. Use the following information to...
Suppose you own Stocks A and B. Based on data over the past decade, the Sharpe ratio for Stock A is 1.3, while the Sharpe ratio for Stock B is 0.8. Briefly explain which stock has performed better.
Stocks A and B have the following historical returns: a. Calculate the average rate of return for each stock during the period 2013 through 2017. b. Assume that someone held a portfolio consisting of...
A packed column is used to remove toluene from water by stripping with air. The water contains 60 ppm toluene (weight basis), and the concentration must be reduced to 2 ppm. The column will operate...
The graph shows how three oscillators respond as the frequency of a driving force is varied. If each oscillator is started and then left alone, which will oscillate for the longest time? A. The red...
Learning Goal: use Coulomb's law and superposition to analyze a two-dimensional system of point charges. Three charges, q1 = : 5.3 C, q = -4.9 C, and = 93 : 3.3 C, are located at the vertices of an...
After a merger presentation from the CEO extoling the benefits of the merger, Tom is excited about working with a team of developers in the company in which his is integrating and talks about his...
The Timeframe Log is a log of how long it would take you to conductand write up the proposed study if you were actually going to carry itout ( bullet points are OK to use here ) . You may wish to...
In the POSITION vs. TIME graph below, click on the spot where the VELOCITY IS ZERO Answer". [NOTE: This problem doesn't work in all browsers. If it's not working in your POSITION vs. TIME GRAPH 0
How might the inflationary flashpoint affect policy decisions? How would you represent the flashpoint on the Phillips curve?
In the synthesis of the keto acid just given, the dicarboxylic acid decarboxylates in a specific way; it gives Explain. HO rather than HO
It is a fact that the federal government (1) encouraged the development of the savings and loan industry, (2) virtually forced the industry to make long-term fixed-interest-rate mortgages, and (3)...
It is a fact that the federal government (1) encouraged the development of the savings and loan industry, (2) virtually forced the industry to make long-term fixed-interest-rate mortgages, and (3)...
Suppose interest rates on Treasury bonds rose from 5% to 9% as a result of higher interest rates in Europe. What effect would this have on the price of an average companys common stock?
why you assume value of Machine A is assumed to decrease by $7,000 each year for the purpose of these calculations?
1. You want to create a Dog object. Which of the following would you use to describe it? (Choose all that apply.) A. String breed B. int age C. boolean isADog D. String ownerName E....
Part 1: Cathy Forth Photography Services (20 marks) You have been hired by Cathy Forth as her new bookkeeper. She has given you the following information: Use the current date and provide an...

ABC Companys stock earned a return of 10% this past year. Investors required return for this stock

Question:

Step by Step Answer:

ABCs realized return was 10 which was higher than its re...View the full answer

Fundamentals of Financial Management

Students also viewed these Business questions