Four risk factors, F1, F2, F3, and F4, have been identified to determine the required rate of return, as follows ER I a0 bi1F1 bi2F2 bi3F3 bi4F4, where a0 is the expected return on a security with zero systematic risk Calculate the required rate of return of a portfolio where bi1, bi2, bi3, and bi4...

Four risk factors, F1, F2, F3, and F4, have been identified to determine the required rate of

Question:

Four risk factors, F1, F2, F3, and F4, have been identified to determine the required rate of return, as follows: ER I = a0 + bi1F1 + bi2F2 + bi3F3 + bi4F4, where a0 is the on a security with zero systematic risk. Calculate the required rate of return of a where bi1, bi2, bi3, and bi4 are 0.4, 0.5, 1, and 1.5, respectively; RF = 8 percent; F1 = 10 percent; F2 = 5 percent; F3 = 9 percent; and F4 = 12 percent.

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...