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Memphic Memphic
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6 years ago
Suppose that California Gold Mining's expected return is 2%.  Then California Gold Mining's alpha is closest to:
A) -3%
B) -13%
C) 7%
D) -11%
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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#1
6 years ago
C
Explanation:  C) bCGM =   =   = -1.24
ri = rf + b(E[RMkt] - rf)
= .05 +  -1.24(.13 - .05) = -.05 or -5% Alpha = .02 - -.05 = 7%
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