If we accept the Sharpe model as a description of expected returns, using the data in Table 16 1, find the expected return on a stock in the construction industry with the following characteristics Assume a riskless rate of 8 Beta 1 2 Yield 6 Size 0 4 Bond beta 0 2 Alpha 1 ...

The general K factor APT equation for expected return is Where l 0 is the ret ...

If we accept the Sharpe model as a description of expected returns, using the data in Table

Question:

If we accept the Sharpe model as a description of expected returns, using the data in Table 16.1, find the on a stock in the construction industry with the following characteristics. Assume a riskless rate of 8%:
Beta = 1.2
Yield = 6
Size = 0.4
Bond beta = 0.2
Alpha = 1 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...