Question: Please show work Intro You've analyzed IBM's stock and expect it to deliver a return of 12% over the next year. The stock has a

Please show work Intro You've analyzed IBM's stock and expect it

Please show work

Intro You've analyzed IBM's stock and expect it to deliver a return of 12% over the next year. The stock has a beta of 0.5. The risk-free rate is 2.5% and the expected market risk premium is 4.5%. - Attempt 1/3 for 10 pts. Part 1 What is the security's expected alpha? .073 Correct Note that the market risk premium of 4.5% is net of the risk-free rate, by definition of a risk premium: E(r)CAPM = r g + B(E(rm) rf) = 0.025 + 0.5 0.045 = 0.0475 E(T)CAPM a = E(r). security analysis = 0.12 0.0475 = 0.0725 Part 2 Attempt 2/3 for 10 pts. What is the security's expected alpha according to the CAPM? (In other words, assume the CAPM is true and report what alpha you would expect.) b+ decimals

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