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Finance

If the return on the market portfolio is expected to be 11% ne year, IBM Inc. has a beta of 1.4, and the risk-free rate is 3%. Suppose you conduct your own security analysis, and find that the expected return for IBM next year should be 17%.

a) What is the alpha of IBM when you use CAPM?

b) Would you buy or short sell IBM? Briefly explain your answer.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92775988

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