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The stock of Arbor Pet Trees (APT) is priced based on the given systematic risk factors....

The stock of Arbor Pet Trees (APT) is priced based on the given systematic risk factors. Estimated sensitivities to these risk factors are given by the betas of the regression

RAPT – Rrf = βcreditRcredit + βvalue Rvalue + α + ε

Factor Risk Premium Beta
Credit Risk 5.3% 1.5
Valuation Risk 2.4% 0.3
Risk-free rate 1.3%

What is the expected return on the stock of Arbor Pet Trees if the stock is fairly valued?

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jeff jeffy answered 1 month ago
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