Exhibit 5-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Exhibit 5-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{lcccc}\text { Stock } & \mathrm{R}_{\text {it }} & \mathrm{R}_{\text {mt }} & \mathrm{a}_{\mathrm{i}} & \text { Beta } \\\hline \text { ABC } & 11.5 & 13.0 & 0 & 0.7 \\\text { XYZ } & 9.0 & 7.0 & 0 & 1.1\end{array}$
R_it = return for stock i during period t
R_mt = return for the aggregate market during period t
-Refer to Exhibit 5-2. What is the abnormal rate of return for Stock ABC during period t using only the aggregate market return (ignore differential systematic risk) ?

A) 3.2%
B) 2.4%
C) 1.3%
D) -1.5%
E) 2.0%

Correct Answer:

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