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: |
| 1 | 2 | E(R) | |
| Portfolio A | .76 | 1.06 | 15% |
| Portfolio B | 1.36 | .16 | 13 |
| If the risk-free rate is 4 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.) |
| Risk premiums | |
| Factor F1 | % |
| Factor F2 | % |
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The New Retirementality Planning Your Life And Living Your Dreams At Any Age You Want
Authors: Mitch Anthony
4th Edition
1118705122, 978-1118705124
