6. Security returns are generated by factors according to the following formula: Assume R, = 5 percent,
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6. Security returns are generated by factors according to the following formula:
Assume R, = 5 percent, F, = 6 percent, F, = 7 percent, and F, = 8 percent. Assume also the following for two securities, X and Y:
b,, = .10 bly = .SO
b, = 1.20 b,, = .20
b, = .90 b,, = .40 What actual return would you forecast for the two securities?
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