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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 | 3 |
Portfolio A | .89 | 1.19 | 18% |
Portfolio B | 1.49 | -.29 | 16 |
If the risk-free rate is 6 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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