Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Nov 22, 2022

8. Consider the multifactor APT with two factors. Stock A has an expected return of 17.6%, a beta of 1.45 on factor 1, and

8. Consider the multifactor APT with two factors. Stock A has an expected return of 17.6%, a beta of 1.45 on factor 1, and a

8. Consider the multifactor APT with two factors. Stock A has an expected return of 17.6%, a beta of 1.45 on factor 1, and a beta of .86 on factor 2. The risk premium on the factor 1 portfolio is 3.2%. The risk-free rate of return is 5%. What is the risk-premium on factor 2 if no arbitrage opportunities exist? A. 9.26% B. 3% C. 4% D. 7.75%

Step by Step Solution

★★★★★

3.42 Rating (161 Votes )

There are 3 Steps involved in it

Step: 1

OW227 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 22... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Financial Management

Authors: Eugene F. Brigham, Joel F. Houston

Concise 6th Edition

324664559, 978-0324664553

More Books

Students also viewed these Finance questions

Question

★★★★★

Your grandparents have been left a substantial amount of money and want to invest in a company. Your grandfather trusts you to make a recommendation, but he also wants to see the reasoning behind...

Answered: 1 week ago

Question

★★★★★

An employee has come to you with an issue involving a co-worker. In general, the sales team is a cohesive team, but now a relatively new member of the team is rubbing people the wrong way. She never...

Answered: 1 week ago

Question

★★★★★

Case Study - Scenario 2 An employee has come to you with an issue involving a co-worker. In general, the sales team is a cohesive team, but now a relatively new member of the team is rubbing people...

Answered: 1 week ago

Question

★★★★★

ed The Engine Guys produces specialized engines for "snow climber buses. The company's normal monthly production volume is 2,500 engines, whereas its monthly production capacity is 5,000 engines. The...

Answered: 1 week ago

Question

★★★★★

What is meant by the laid-down cost of inventory?

Answered: 1 week ago

Question

★★★★★

The following table gives accounting data from the 1994 annual reports of six biotechnology firms. The market value of the equity of five of the firms is also given. All numbers are in millions of...

Answered: 1 week ago

Question

★★★★★

2. Miss McClintock discovered that five of the children in her class were developmentally advanced. All of the students language skills were exploding! Although many of the students still had trouble...

Answered: 1 week ago

Question

★★★★★

Pennys Pool Service & Supply, Inc. (PPSS) had the following transactions related to operating the business in its first years busiest quarter ended September 30, 2013: a. Placed and paid for $2,600...

Answered: 1 week ago

Question

★★★★★

Practike Gradebook ORION signment Sheffield Corp. issued $427,000 ef 5-year, 6% bonds at 97 on January 1, 2019. The bonds pay interest annualy Prepare the journal entry to record the issuance of the...

Answered: 1 week ago

Question

★★★★★

Complete the "Rate Category" column on the "Airline" worksheet. After completing the column do exploratory analysis of the airline data to determine how many Airlines fall under Category A ? Use the...

Answered: 1 week ago

Question

★★★★★

Premium Co. produce bancos de parque. Un cliente ha ofrecido a Premium Co. $800 por unidad por 100 unidades. Para completar el pedido, Premium incurrira en costos a nivel de unidad de $600 por unidad...

Answered: 1 week ago

Question

★★★★★

The Dexter Products Company manufactures a single product. Its operations are a continuing process carried on in two departments - machining and finishing. In the production process, materials are...

Answered: 1 week ago

Question

★★★★★

Correlation is an important concept in portfolio optimisation. Portfolios with combinations of assets with low or negative correlation tend to display lower volatility than individual assets or...

Answered: 1 week ago

Question

★★★★★

The following data was prepared by the Oriole Company. Total Variable Fixed Sales price $22/unit Direct materials used $82,650 Direct labor $96,000 Manufacturing overhead $99,600 $9,600 $90,000...

Answered: 1 week ago

Question

★★★★★

TFS is trading at $50 / share.It has no dividend and the current cc interest rate is 4%.What is the 2 month forward price? TFS is still trading at $50 / share and the cc interest rate r =...

Answered: 1 week ago

Question

★★★★★

You have received detailed feedback on the concept you proposed for assignment 1. Based on that feedback and based on the concept of Minimum Viable Product - MVP you must rethink and sharpen your...

Answered: 1 week ago

Question

★★★★★

Identify each of the following as an input to or an output from Accounting Information Systems: 1. Bank statement 2. Sales invoice issued to customers 3. Schedule of accounts payable 4. Income...

Answered: 1 week ago

Question

★★★★★

Doorharmony Company makes doorbells. It has a weighted- average cost of capital of 5% and total assets of $ 5,900,000. Doorharmony has current liabilities of $ 750,000. Its operating income for the...

Answered: 1 week ago

Question

★★★★★

If a stock is not in equilibrium, explain how financial markets adjust to bring it into equilibrium.

Answered: 1 week ago

Question

★★★★★

Ebersoll Mining has $6 million in sales, its ROE is 12%, and its total assets turnover is 3.2. The company is 50% equity financed. What is its net income?

Answered: 1 week ago

Question

★★★★★

Klose Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming...

Answered: 1 week ago

Question

★★★★★

3. After reading this chapter, what is your view are you more of a cultural relativist or universalist on the issue of whether psychotherapy, developed in a Western European context, can be exported...

Answered: 1 week ago

Question

★★★★★

3. Do you know of people from different cultures than your own who are different in how they interact with others? Treat their friends and families differently? How are those behaviors adaptive for...

Answered: 1 week ago

Question

★★★★★

1. How have the studies reviewed in this chapter challenged you in thinking about whether psychological disorders are universal versus culture- specific? Do you believe that disorders like depression...

Answered: 1 week ago

Previous Question Next Question