An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time:rF = .10% + 1.1rMIf the market index subsequently rises by 8% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
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Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 1P: The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market...
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An index model regression applied to past monthly returns in Ford’s stock price produces the following estimates, which are believed to be stable over time:
rF = .10% + 1.1rM
If the market index subsequently rises by 8% and Ford’s stock price rises by 7%, what is the abnormal change in Ford’s stock price?

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