Question
Consider a two-factor APT. Stock A has an expected return of 16.4%, a beta of 1.4 on factor 1 and a beta of 0.8 on
Consider a two-factor APT. Stock A has an expected return of 16.4%, a beta of 1.4 on factor 1 and a beta of 0.8 on factor 2. The risk premium on the factor 1 portfolio is 3%. The risk free rate of return is 6%. What are the expected returns of the two factors if no arbitrage opportunities exist?
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Contemporary Business Mathematics with Canadian Applications
Authors: S. A. Hummelbrunner, Kelly Halliday, Ali R. Hassanlou, K. Suzanne Coombs
11th edition
134141083, 978-0134141084
