Answered step by step
Verified Expert Solution
Question
1 Approved Answer
can I get just answers plz? Problem 8-17 APT Consider a three-factor APT model. The factors and associated risk premiums are: Factor Change in gross
can I get just answers plz?
Problem 8-17 APT Consider a three-factor APT model. The factors and associated risk premiums are: Factor Change in gross national product (GNP) Change in energy prices Change in long-term interest rates Risk Premium (%) +5.5 0.5 +2.5 Calculate expected rates of return on the following stocks. The risk-free interest rate is 5.4%. a. A stock whose return is uncorrelated with all three factors. (Enter your answer as a percent rounded to 1 decimal place.) b. A stock with average exposure to each factor (.e., with b=1 for each). (Enter your answer as a percent rounded to 1 decimal place.) c. A pure-play energy stock with high exposure to the energy factor (b = 1.9) but zero exposure to the other two factors. (Enter your answer as a percent rounded to 2 decimal places.) d. An aluminum company stock with average sensitivity to changes in interest rates and GNP, but negative exposure of b=-1.4 to the energy factor. (The aluminum company is energy-intensive and suffers when energy prices rise.) (Enter your answer as a percent rounded to 2 decimal places.) a. % b. Expected rate of return Expected rate of return Expected rate of return Expected rate of return % % dStep by Step Solution
There are 3 Steps involved in it
Step: 1
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