ans-odd-problems-ch13

# ans-odd-problems-ch13 - CHAPTER 13 CORPORATE FINANCING...

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CHAPTER 13 CORPORATE FINANCING DECISIONS AND EFFICIENT CAPITAL MARKETS Answers to odd-numbered problems Basic 1. To find the cumulative abnormal returns, we chart the abnormal returns for each of the three airlines for the days preceding and following the announcement. . The abnormal return is calculated by subtracting the market return from a stock’s return on a particular day, R i – R M . Group the returns by the number of days before or after the announcement for each respective airline. Calculate the cumulative average abnormal return by adding each abnormal return to the previous day’s abnormal return. Abnormal returns ( R i – R M ) Days from announcement Delta United American Sum Average abnormal return Cumulative average residual –4 –0.2 –0.2 –0.2 –0.6 –0.2 –0.2 –3 0.2 –0.1 0.2 0.3 0.1 –0.1 –2 0.2 –0.2 0.0 0.0 0.0 –0.1 –1 0.2 0.2 –0.4 0.0 0.0 –0.1 0 3.3 0.2 1.9 5.4 1.8 1.7 1 0.2 0.1 0.0 0.3 0.1 1.8 2 –0.1 0.0 0.1 0.0 0.0 1.8 3 –0.2 0.1 –0.2

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## This note was uploaded on 02/14/2011 for the course FINANCE 620 taught by Professor Halstead during the Fall '09 term at UMBC.

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ans-odd-problems-ch13 - CHAPTER 13 CORPORATE FINANCING...

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