Consider the following simplified APT model: Factor Market Expected Risk Premium (%) Interest rate Yield spread 6.2 -0.8 4.8 Factor Risk Exposures Market (Interest Rate (Yield Spread ( Stock b₁) P 1.0 p2 1.0 p3 0.3 b₂) -1.4 0 2.1 b3) -0.6 0.1 0.6 Calculate the expected return for each of the stocks shown in the table above. Assume rf = 3.8%. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Consider the following simplified APT model: Factor Market Expected Risk Premium (%) Interest rate Yield spread 6.2 -0.8 4.8 Factor Risk Exposures Market (Interest Rate (Yield Spread ( Stock b₁) P 1.0 p2 1.0 p3 0.3 b₂) -1.4 0 2.1 b3) -0.6 0.1 0.6 Calculate the expected return for each of the stocks shown in the table above. Assume rf = 3.8%. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
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
Problem 1PS
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Vijay
Transcribed Image Text:Consider the following simplified APT model:
Factor
Expected Risk Premium (%)
Market
Interest rate
Yield spread
6.2
-0.8
4.8
Factor Risk Exposures
Market
Stock
b)
P
1.0
-1.4
p2
1.0
0
Interest Rate (Yield Spread (
b₂)
b3 )
-0.6
0.1
p3
0.3
2.1
0.6
Calculate the expected return for each of the stocks shown in the table above. Assume r = 3.8%.
Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Expected return P
Expected return P2
7.80 %
10.38 %
Expected return P3
%
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