Question
#3. Suppose all stocks obey an APT three-factor model. A given stock has a beta of .8 with respect to factor 1, a beta of
#3. Suppose all stocks obey an APT three-factor model. A given stock has a beta of .8 with respect to factor 1, a beta of 1.0 with respect to factor 2, and a beta of 1.2 with respect to factor 3. The risk-premium on factor 1 is 4%, the risk-premium on factor 2 is 6% and the risk-premium on factor 3 is 8%. The expected return on the stock is 21%. What is the risk-free interest rate?
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Entrepreneurial Financial Management An Applied Approach
Authors: Jeffrey R Cornwall, David O Vang, Jean M Hartman
5th Edition
0367335417, 978-0367335410
