USE THE FOLLOWING INFORMATION FOR THE NEXT FOUR PROBLEMS
Stock Rit Rmt ai Beta
A 10.6 15 0 0.8
Z 9.8 8.0 0 1.1
Rit = return for stock i during period t
Rmt = return for the aggregate market during period t
Question 1. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)?
Question 2. What is the abnormal rate of return for Stock Z during period t using only the aggregate market return (ignore differential systematic risk)?
Question 3. What is the abnormal rate of return for Stock A when you consider its systematic risk measure (beta)?
Question 4. What is the abnormal rate of return for Stock Z when you consider its systematic risk measure (beta)?