The table below gives information on the expected and required rates of return based on the CAPM for three securities an analyst is valuing:
| Expected Rate Don't use plagiarized sources. Get Your Custom Essay on define ex ante alpha 543627 For $10/Page 0nly | CAPM Required Rate | |
| Security 1 | 0.2 | 0.21 |
| Security 2 | 0.18 | 0.08 |
| Security 3 | 0.11 | 0.1 |
A. Define ex ante alpha.
B. Calculate the expected alpha of Securities 1, 2, and 3 and rank them from most attractive to least attractive.
C. Based on your answer to Part B, what risks attach to selecting among Securities 1, 2, and 3?
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