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Suppose two risk factors are identified for the economy: the overall market return, rakt, and the rate of inflation, i. It is known that E(TMKT]
Suppose two risk factors are identified for the economy: the overall market return, rakt, and the rate of inflation, i. It is known that E(TMKT] = 8% and that E[] = 3%. An asset with BMKT = 0.5 and B = -0.1 has an expected return of 10%. If the realized values turn out to be rukt = 7% and i = 5%, what is your revised estimate for the realized asset return? 3 11.4% -1.4% 9.3% None of the other answers are correct 8.6%
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