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Select any type of publicly traded company you have interest in and set up the equation for calculating the required or expected rate of return
Select any type of publicly traded company you have interest in and set up the equation for calculating the required or expected rate of return using the APT Arbitrage Pricing Theory Model. Use your own estimates guesstimates for the weighting of each factor, so that the equation would accurately generate a required or expected rate of return that is mathematically correct under APT protocols.
Helpful Hint: This is a SHORT, written answer. It is a simple hypothetical. Do not spend too much time or "overthink" this problem as this merely a hypothetical exercise to measure your comprehension on how the APT model can be applied in real world situations. ALSO you are not called upon to calculate an Er but to set up the equation with the appropriate weighting factors only.
Another Helpful Hint: DO NOT refer to volatility coefficients as "Beta" factors as that is comingling with a different Capital Market Theory model and is NOT APPLICABLE for this problem! Remember you are setting up the framework on conceptualizing how to solve the problem.
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