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Consider the following simplified APT model: Expected Risk Premium (%) Factor Market 6.4 Interest rate -0.6 Yield spread 5.0 Factor Risk Exposures Market Interest Rate Yield Spread (b3) Stock (b1) (b2) 0.8 -1.6 -0.3 p2 0.8 -0.1 p3 0.3 1.9 0.8 Calculate the expected return for each of the stocks shown in the table above. Assume rf = 4.2%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Consider the following simplified APT model: Expected Risk Premium (%) Factor Market 6.4 Interest rate -0.6 Yield spread 5.0 Factor Risk Exposures Market Interest Rate Yield Spread (b3) Stock (b1) (b2) 0.8 -1.6 -0.3 p2 0.8 -0.1 p3 0.3 1.9 0.8 Calculate the expected return for each of the stocks shown in the table above. Assume rf = 4.2%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Problem 8-19 APT Consider the following simplified APT model: Expected Risk Premium (%) Factor ts Market Interest rate 6.4 -0.6 Yield spread 04:57:43 5.0 Factor Risk Exposures eferences Market Interest Rate Yield Spread Stock (b1) (b2) (b3) 0.8 -1.6 -0.3 p2 0.8 -0.1 p3 0.3 1.9 0.8 Calculate the expected return for each of the stocks shown in the table above. Assume rf= 4.2%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Transcribed Image Text:Problem 8-19 APT Consider the following simplified APT model: Expected Risk Premium (%) Factor ts Market Interest rate 6.4 -0.6 Yield spread 04:57:43 5.0 Factor Risk Exposures eferences Market Interest Rate Yield Spread Stock (b1) (b2) (b3) 0.8 -1.6 -0.3 p2 0.8 -0.1 p3 0.3 1.9 0.8 Calculate the expected return for each of the stocks shown in the table above. Assume rf= 4.2%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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