Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 24, 2024

Consider the multi-factor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are 6% and 9%, respectively. Stock A

Consider the multi-factor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are 6% and 9%, respectively. Stock A has a beta of 1.1 on factor 1, and a beta of 1 on factor 2. The expected return on stock A is 20%. If no arbitrage opportunities exist, then what is the risk-free rate?

Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

9.21 Suppose you wish to detect a difference between and (either or ) and, instead of running a two-tailed test using a = 0.05, you use the following test procedure. You wait until you have collected...

Answered: 1 week ago

Question

★★★★★

The inventory, purchases, and sales of Product CAT for March and April are listed below. The company closes its books at the end of each month. It uses the periodic inventory system. Required 1....

Answered: 1 week ago

Question

★★★★★

4. Fishface Ltd is an Australian company which farms salmons in ocean tanks off the Port Stephen's coast of NSW (Australia) and currently sells domestically to IGA Supermarkets. Fishface Ltd has...

Answered: 1 week ago

Question

★★★★★

Each time a function is called in a recursive solution, the system incurs overhead that is not incurred with a loop. True False

Answered: 1 week ago

Question

★★★★★

Mr. Jones is contemplating retirement. He has just celebrated his 55th birthday and his net worth is $2 million. He hopes that after retirement he can maintain a lifestyle that costs him $100,000 per...

Answered: 1 week ago

Question

★★★★★

5. A manager of a Merchandising firm wishes to test whether its three salesmen X, Y and Z tend to make sales of the same size or whether they differ in their selling abilities. During a week there...

Answered: 1 week ago

Question

★★★★★

What is one way a professional running a lineup can make the procedure suggestible to an eyewitness? A) encouraging the witness when they identify the suspect B) remaining silent when witnesses make...

Answered: 1 week ago

Question

★★★★★

Suppose that 3000 drivers in Wakanda were randomly breath-tested on 21 April 2019 and 116 were above the limit of 0.05 blood-alcohol level. On 15 May 2019, 4000 drivers were tested and 98 were above...

Answered: 1 week ago

Question

★★★★★

Which of the following is an appropriate guideline for waste disposal? O a. Clean trash cans regularly to remove drips and crumbs that provide food for pests Ob. Do not use plastic liners in trash...

Answered: 1 week ago

Previous Question Next Question