On February 19th, 2018, Jet Inc. reported its financial results for the quarter ended December...
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On February 19th, 2018, Jet Inc. reported its financial results for the quarter ended December 31, 2017. Net income increased to $100 million, its sales increased to $1 billion, which was an increase of approx. 20% from the previous year's quarter. These results were in line with analysts' forecasts.
On February 19th, 2018, the company Jet projected further increases for next quarter, earnings per share by 3%. The management explained that the increase was due to company's expansion into a complementary product line.
Following these announcements, Jet's shares, traded on the TSX, increased in price by $0.20 to $1.20 per share on February 18th, 2018. On the same day, assume the TSX composite index increased by 42.26 points to 14,119.73. Jet's beta was 2 at this time. Assume the Bank of Canada bank rate on February 19th, 2018 was Rf = 4.5%, or approximately 0.0001 per day.
Required
Use the market model to calculate the abnormal return on Jet shares for February 19th, 2018. Note the theoretical relationship, from the capital pricing model (CAPM).
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