Suppose the returns on Security A are linearly related to four risk factors: F1, F2, F3, and F4.The required rate of return on Security A can be determined as follows: .The risk-free rate is 4.5%.What is the required rate of return of Security A, where b1, b2, b3, and b4 are 0.4, 0.8, 0.6, and 0.7, respectively, and F1, F2, F3, and F4 are 5%, 6%, 10%, and 8%, respectively?
A)18.40%
B)20.60%
C)22.90%
D)24.30%

Question

Suppose the returns on Security A are linearly related to four risk factors: F1, F2, F3, and F4.The required rate of return on Security A can be determined as follows:  .The risk-free rate is 4.5%.What is the required rate of return of Security A, where b1, b2, b3, and b4 are 0.4, 0.8, 0.6, and 0.7, respectively, and F1, F2, F3, and F4 are 5%, 6%, 10%, and 8%, respectively?
A)18.40% 
B)20.60% 
C)22.90% 
D)24.30%

Quizplus · Accepted Answer

The Answer of Suppose the returns on Security A are linearly related to four risk factors: F1, F2, F3, and F4.The required rate of return on Security A can be determined as follows:  .The risk-free rate is 4.5%.What is the required rate of return of Security A, where b1, b2, b3, and b4 are 0.4, 0.8, 0.6, and 0.7, respectively, and F1, F2, F3, and F4 are 5%, 6%, 10%, and 8%, respectively?
A)18.40% 
B)20.60% 
C)22.90% 
D)24.30%

Suppose the Returns on Security a Are Linearly Related to Four