FB has a beta of 1

Finance Dec 25, 2020

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

Expert Solution

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%

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