Question
24. Please note that this question is worth TRIPLE value. You have collected information about 3 companies risk-factor loadings as well as their historically realized
24. Please note that this question is worth TRIPLE value.
You have collected information about 3 companies risk-factor loadings as well as their historically realized average return, all of which is presented in the table below:
| Company | Factor 1 | Factor 2 | Factor 3 | Historical return |
|---|---|---|---|---|
| CAB | 1 | 2 | 3 | 11% |
| AYZ | 1 | 0 | 1 | 5% |
| MON | 0 | 2 | 1 | 7% |
You also know the risk-free to 2%.
What is the premium of the 2nd risk factor assuming that these stocks are fairly priced?
[Please give your answer in percent to the second decimal. Thus if your response is 1.256% please write 1.26]
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
