Question
Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available
Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available about two well-diversified portfolios:
Portfolio Beta on F1Betaon F2Expected Return
A 1.0 2.0 19 %
B 2.0 0.0 12 %
Assuming no arbitrage opportunities exist, what should be the values of the risk premium on the factor F1 portfolio and factor F2 portfolio?
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Entrepreneurial Finance
Authors: J . chris leach, Ronald w. melicher
4th edition
538478152, 978-0538478151
