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Consider a two factor APT model. Aloha corp. has a beta of 1.5 for the first factor and 2 for the second factor, and an
"Consider a two factor APT model. Aloha corp. has a beta of 1.5 for the first factor and 2 for the second factor, and an expected return of 20%. The risk premium for the first factor is 6% and the risk premium for the second factor is 4%. Another firm, Honululu corp. has a beta of 2 for the first factor and 3 for the second factor. If the actual forecasted return for Honululu corp is 27%, how should you trade Honululu?
Buy | ||
Sell | ||
Neither buy or sell | ||
None of the Above |
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