Question
There are two assets following single-factor model, Asset 1 and Asset 2. Their model parameters are given as follow, Asset i i 1 0.10 1.5
There are two assets following single-factor model, Asset 1 and Asset 2. Their model parameters are given as follow, Asset i i 1 0.10 1.5 2 0.08 0.5 Assume E[f]=e1=e2=0. a) Construct a zero-beta portfolio from these two risky assets. b) Find the factor risk premium using the principle of no-arbitrage. c) What is the meaning of factor risk premium in single-factor models?
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ISE Essentials Of Investments
Authors: Zvi Bodie, Alex Kane, Alan Marcus
12th International Edition
1265450099, 9781265450090
