Question: The following table shows the beta and expected return for each of five stock. Stock (i) i E(r) i 1 1.2 0.124 2 1.0 0.110

The following table shows the beta and expected return for each of five stock.

Stock (i)

i

E(r) i

1

1.2

0.124

2

1.0

0.110

3

0.7

0.103

4

0.4

0.068

5

0.1

0.047

All of these stocks except on lie on the security Market Line. Required:

Calculate the alpha of the stock that does NOT lie on the security Market Line.

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