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What is your required rate of return

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Question - At the beginning of 2002, the shares of General Motors Corporation traded at $60 each, and closed the year in December at $40. GM paid a $2.00 dividend on each share during the year.

1. What was the rate of return that shareholders earned on GM shares during 2002?

2. The yield on long-term US Treasuries at the beginning of 2002 was 5% and you require a 5% risk premium for this stock. What is your required rate of return (the beta return)?

3. Using this required rate of return, what is the abnormal rate of return (alpha) for the year?

Reference no: EM133077374

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