Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I posted this question earlier also but no one is replying. Please answer this Options for 1st blank are 15.70% 8.30% 16.30% 13.00% Options for

I posted this question earlier also but no one is replying. Please answer this

image text in transcribedOptions for 1st blank are 15.70% 8.30% 16.30% 13.00%

Options for 2nd blank are -7.70% 16.30%. 0.30%. 15.70%

Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. The APT is more restrictive than the Capital Asset Pricing Model (CAPM). The APT does not restrict the number or nature of the factors relevant to the determination of a stock's return. O The APT does not identify the relevant factors. The APT assumes that all investors hold the market portfolio. Emily, an analyst at Butoh General (BG), models the company's stock assuming that all stocks' returns depend on only three risk factors: inflation, industrial production, and the aggregate degree of risk aversion. The risk-free rate is FRF = 8%, the return on the market is IM = 15%, and the rest of the available data is given in the following table: Variable Value 13% 10% 6% The required rate of return on an inflation portfolio, r, The required return on an industrial production portfolio, r, The required return on a risk-bearing portfolio, r, Factor sensitivity to the inflation portfolio, b, Factor sensitivity to the industrial production portfolio, b, Factor sensitivity to the risk-bearing portfolio, b, Butoh General's beta, bBG 0.9 1.2 -0.7 1.1 Using an APT model, Emily calculates that BG's required rate of return is If Emily used the Capital Asset Pricing Model, she would have calculated that BG's required rate of return is

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

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

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

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

Get Started

Recommended Textbook for

Mergers And Acquisitions A Study Of Financial Performance Motives And Corporate Governance

Authors: Neelam Rani , Surendra Singh Yadav, Pramod Kumar Jain

1st Edition

981102202X,9811022038

More Books

Students also viewed these Finance questions