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Consider the following simplified APT model: Expected Risk Premium (8) 5.9 -0.7 4.5 Factor Market Interest rate. Yield spread Stock P p p3 Market (b1)
Consider the following simplified APT model: Expected Risk Premium (8) 5.9 -0.7 4.5 Factor Market Interest rate. Yield spread Stock P p p3 Market (b1) 1.3 1.3 0.3 Factor Risk Exposures Interest Rate (52) -1.1 0 2.0 Expected return P Expected return P2 Expected return P3 Yield Spread (b3) -0.3 0.4 0.3 Calculate the expected return for each of the stocks shown in the table above. Assume rf = 3.2%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) % % %
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