Suppose stock returns can be explained by the following three-factor model: R=RF+B1F+B2F2-B3F3 Assume there is no firm-specific risk. The information for each stock is presented here: ẞ1 B2 P3 Stock A 1.45 .65 .20 Stock B .80 1.45 -.40 Stock C .77 -.21 1.32 The risk premiums for the factors are 6.5 percent, 5.7 percent, and 6.1 percent, respectively. You create a portfolio with 20 percent invested in Stock A, 20 percent invested in Stock B, and the remainder in Stock C. The risk-free rate is 3.6 percent. What is the beta for each factor for the return on your portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Factor F1 Factor F2 Factor F3 What is the expected return'on your portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %
Suppose stock returns can be explained by the following three-factor model: R=RF+B1F+B2F2-B3F3 Assume there is no firm-specific risk. The information for each stock is presented here: ẞ1 B2 P3 Stock A 1.45 .65 .20 Stock B .80 1.45 -.40 Stock C .77 -.21 1.32 The risk premiums for the factors are 6.5 percent, 5.7 percent, and 6.1 percent, respectively. You create a portfolio with 20 percent invested in Stock A, 20 percent invested in Stock B, and the remainder in Stock C. The risk-free rate is 3.6 percent. What is the beta for each factor for the return on your portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Factor F1 Factor F2 Factor F3 What is the expected return'on your portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %
Chapter18: Asymmetric Information
Section: Chapter Questions
Problem 18.10P
Related questions
Question
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
![Suppose stock returns can be explained by the following three-factor model:
R=RF+B1F+B2F2-B3F3
Assume there is no firm-specific risk. The information for each stock is presented here:
ẞ1
B2
P3
Stock A
1.45
.65
.20
Stock B .80
1.45
-.40
Stock C
.77
-.21
1.32
The risk premiums for the factors are 6.5 percent, 5.7 percent, and 6.1 percent,
respectively. You create a portfolio with 20 percent invested in Stock A, 20 percent
invested in Stock B, and the remainder in Stock C. The risk-free rate is 3.6 percent. What
is the beta for each factor for the return on your portfolio? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Factor F1
Factor F2
Factor F3
What is the expected return'on your portfolio? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa9324495-bd5c-424f-9150-8935e768e1a6%2F3e79111c-dbc0-480c-bf8d-6d65d12273d5%2Frb8v4n_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose stock returns can be explained by the following three-factor model:
R=RF+B1F+B2F2-B3F3
Assume there is no firm-specific risk. The information for each stock is presented here:
ẞ1
B2
P3
Stock A
1.45
.65
.20
Stock B .80
1.45
-.40
Stock C
.77
-.21
1.32
The risk premiums for the factors are 6.5 percent, 5.7 percent, and 6.1 percent,
respectively. You create a portfolio with 20 percent invested in Stock A, 20 percent
invested in Stock B, and the remainder in Stock C. The risk-free rate is 3.6 percent. What
is the beta for each factor for the return on your portfolio? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Factor F1
Factor F2
Factor F3
What is the expected return'on your portfolio? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return
%
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