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Consider the following multifactor (APT) model of security returns for a particular stock. Factor Factor beta Factor risk premium inflation 1.4 0.03 industrial production 1.4
Consider the following multifactor (APT) model of security returns for a particular stock.
Factor | Factor beta | Factor risk premium |
inflation | 1.4 | 0.03 |
industrial production | 1.4 | 0.09 |
oil prices | 1.4 | 0.04 |
If the T-bill currently offers a 0.03 yield, then find the expected rate of return on this stock, assuming that the market views the stock as fairly priced.
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