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Homework answers / question archive / FB has a beta of 1
FB has a beta of 1.2 and a realized return of 14.2%. What is FB's alpha if the market risk premium is 12.9% and the risk-free rate is 1.6%? Please report your answer in percent terms rounded to two decimal places. Your Answer: Answer
Alpha = Realised Return - CAPM Return
= 14.20% - (Rf + beta * Risk Premium)
= 14.20% - (1.60% + 1.20 * 12.90%)
= 14.20% - 17.08%
= -2.88%
