Question
Consider the multi-factor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are respectively 5% and 3%. Stock A
Consider the multi-factor APT with two factors. The risk premiums on the factor 1 and
factor 2 portfolios are respectively 5% and
3%. Stock A has a beta of 1.4 on factor 1,
and a beta of 0.5 on factor 2. The expected return on stock A is 14%. If no arbitrage
opportunities exist, the risk-free rate of return is __________.
Could you explain how to solve this problem?
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Introduction To Personal Finance Beginning Your Financial Journey
Authors: Lance Palmer, John E. Grable
2nd Edition
1119797063, 978-1119797067
