Suppose ABC's common stock has a return of 12.87 percent,the risk-free rate is 2.65 percent,the market return is 13.46 percent,and there is currently no unsystematic influence affecting ABC's return.Given a one-factor APT model,what is the factor beta?
A).896
B).945
C)1.003
D).962
E).979

Question

Quizplus · Accepted Answer

The factor beta ($\beta$) can be calculated using the formula derived from the Capital Asset Pricing Model (CAPM) equation, which is $\beta = \frac{R_i - R_f}{R_m - R_f}$, where $R_i$ is the return on the asset (12.87%), $R_f$ is the risk-free rate (2.65%), and $R_m$ is the market return (13.46%). Plugging in the values: $\beta = \frac{12.87\% - 2.65\%}{13.46\% - 2.65\%} = \frac{10.22\%}{10.81\%} = 0.945$.

Suppose ABC's Common Stock Has a Return of 12