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uestion 7 0 out of 1 points The chart below shows the results of performing the following regression analysis for AVD common stock for calendar year 2003. R AND R f = intercept + slope (R SP500 R f) Note: When using Excel to insert a trendline for data, the output is formatted in decimal format, not as a percentage. The equation above the chart is therefore in decimal format, even though the data used to create it is in percentage format. Graphically estimate the value for Jensens alpha, rounding your result to the nearest integer percent. y 1.7626x+00548 R 02357 30% 25% 20% t… 15%+ 10% t ,.. 0%t -5% t -10% t -15% , . . .. 、 , ; 2% 4% 6% 8% 10% -4% -2% 0% S2500-Rr Selected Answer: 30%
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Answer #1

Jensens Alpha computes the risk adjusted value of an investment. Using the figure given, the trendline equation can be used to determine Jensens Alpha.

The equation is in the form

Y= Beta*X + Alpha and hence

Jensens Alpha = 0.0548 = 5.48%

Rounded off to 5%

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