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A three factor APT has the following risk premiums (i.e. lambdas): RP1 = 5.2%, RP2 = 3.4%. At equilibrium, assets with no risk have expected
A three factor APT has the following risk premiums (i.e. lambdas): RP1 = 5.2%, RP2 = 3.4%. At equilibrium, assets with no risk have expected returns of 1.3%. You are forecasting that a particular asset has the following risk: b1 = 0.4 and b2 = 0.7. This asset is currently selling for $37.75. If markets are in equilibrium, what is your forecast of the price of this asset one period from now?
Answer in dollars and cents.
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