21. Consider a factor model with earnings yield (or earnings/price ratio) and bookprice (or book value/market price

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21. Consider a factor model with earnings yield (or earnings/price ratio) and bookprice

(or book value/market price ratio) as the two factors. Stock A has an earnings yield of 10% and a book-price of 2. Stock B's earnings yield is 15% and its book-price is .90. The zero factors of stocks A and Bare 7% and 9%, respectively.

If the expected returns of stocks A and Bare 18% and 16.5%, respectively, what are the expected earnings-yield and book-price factor values?

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Investments

ISBN: 9788120321014

6th Edition

Authors: William F. Sharpe, Gordon J. Alexander, Jeffery V. Bailey

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Question Posted: Jul 25, 2024 06:05 AM

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21. Consider a factor model with earnings yield (or earnings/price ratio) and bookprice (or book value/market price

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Investments

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