You Consider Buying a Share of Stock at a Price

Multiple Choice

You consider buying a share of stock at a price of $25.The stock is expected to pay a dividend of $1.50 next year and your advisory service tells you that you can expect to sell the stock in one year for $28.The stock's beta is 1.1,rf is 6% and E[rm] = 16%.What is the stock's abnormal return?

A) 1%
B) 2%
C) -1%
D) -2%