Consider the multifactor APT with two factors.Stock A has an expected return of 16.4%,a beta of 1.4 on factor 1 and a beta of .8 on factor 2.The risk premium on the factor 1 portfolio is 3%.The risk-free rate of return is 6%.What is the risk-premium on factor 2 if no arbitrage opportunities exit?
A) 2%
B) 3%
C) 4%
D) 7.75%
E) none of the above
Correct Answer:
Verified
Q1: Consider the multifactor model APT with two
Q2: Consider the multifactor APT with two factors.The
Q4: Consider the single-factor APT.Stocks A and B
Q5: Consider the one-factor APT.The variance of returns
Q6: The APT was developed in 1976 by
Q7: In developing the APT,Ross assumed that uncertainty
Q8: _ a relationship between expected return and
Q9: Which pricing model provides no guidance concerning
Q10: The exploitation of security mispricing in such
Q11: In a multi-factor APT model,the coefficients on
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents