Question
Suppose stock returns can be explained by a two-factor model. The firm-specific risks for all stocks are independent. The following table shows the information for
Suppose stock returns can be explained by a two-factor model. The firm-specific risks for all stocks are independent. The following table shows the information for two diversified portfolios: |
| β1 | β2 | E(R) | |
|---|---|---|---|
| Portfolio A | .82 | 1.12 | 16% |
| Portfolio B | 1.42 | −.22 | 14 |
If the risk-free rate is 3 percent, what are the risk premiums for each factor in this model? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Factor F1_________ % Factor F2 __________ % |
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As per 2 factor model F1 Risk premium of Factor 1 F2 Ri...
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Introduction to Chemical Engineering Thermodynamics
Authors: J. M. Smith, H. C. Van Ness, M. M. Abbott
7th edition
71247084, 978-0071247085
