Question: The following table shows the beta and expected return for each of five stocks: Stocks (i) Beta i E(r i ) 1 1.2 0.124 2

The following table shows the beta and expected return for each of five stocks:

Stocks (i) Betai E(ri)
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 one lie on the Security Market Line. Calculate the alpha of the stock that does NOT lie on the Security Market Line.

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