The stock of Arbor Pet Trees (APT) is priced based on the given systematic risk factors Estimated sensitivities to these risk factors are given by the betas of the regression R APT R rf credit R credit value R value Factor Risk Premium Beta Credit Risk 4 3 0 6 Valuation Risk 4 5 0 3 Risk free rate 1 3 What is the expected return on the stock of Arbor Pet Trees if the stock is fairly valued

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The stock of Arbor Pet Trees (APT) is priced based on the given systematic risk factors. Estimated sensitivities to these risk factors are given by

The stock of Arbor Pet Trees (APT) is priced based on the given systematic risk factors. Estimated sensitivities to these risk factors are given by the betas of the regression

R_APT R_rf = _creditR_credit + _value R_value + +

Factor	Risk Premium	Beta
Credit Risk	4.3%	0.6
Valuation Risk	4.5%	0.3
Risk-free rate	1.3%

What is the expected return on the stock of Arbor Pet Trees if the stock is fairly valued?

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