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Consider the following simplified APT model: Factor Expected Risk Premium (%) Market 6.3 Interest rate 0.7 Yield spread 4.9 Factor Risk Exposures Market Interest Rate
Consider the following simplified APT model:
Factor | Expected Risk Premium (%) |
Market | 6.3 |
Interest rate | 0.7 |
Yield spread | 4.9 |
Factor Risk Exposures | |||
Market | Interest Rate | Yield Spread | |
Stock | (b1) | (b2) | (b3) |
P | 0.9 | 1.5 | 0.2 |
P2 | 0.9 | 0 | 0.0 |
P3 | 0.3 | 2.0 | 0.7 |
Calculate the expected return for each of the stocks shown in the table above. Assume rf = 4.0%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Expected return P: %
Expected return P2: %
Expected return P3: %
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