Question
Consider the multifactor APT with two factors. Stock A has an expected return of 14%, a beta of 1.2 on factor 1 and a beta
Consider the multifactor APT with two factors. Stock A has an expected return of 14%, a beta of 1.2 on factor 1 and a beta of .8 on factor 2. The risk premium on the factor 1 portfolio is 3%. The risk-free rate of return is 4%. What is the risk-premium on factor 2 if no arbitrage opportunities exist?
A. 8%
B. 6%
C. 2%
D. 4%
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Finance Applications And Theory
Authors: Marcia Cornett, Troy Adair, John Nofsinger
2nd Edition
0073530670, 9780073530673
