A company Rajesh Ltd has got returns of 12%, 15%, 11%, 6% and 9% respectively for first 5 years and corresponding market returns are 11%, 14%, 16%, 10%, 11%. Calculate the values of systematic and unsystematic risk. Also calculate the value of alpha if the current rate of treasury bill is 7% and comment whether the security is undervalued or overvalued.

A company Rajesh Ltd has got returns of 12%, 15%, 11%, 6% and 9% respectively for first 5 years and corresponding market returns are 11%, 14%, 16%, 10%, 11%. Calculate the values of systematic and unsystematic risk. Also calculate the value of alpha if the current rate of treasury bill is 7% and comment whether the security is undervalued or overvalued.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 15P

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