Consider the following simplified APT model: Factor Expected Risk Premium (%) Market 6.3 Interest rate −.5...

Consider the following simplified APT model:

Factor	Expected Risk Premium (%)
Market	6.3
Interest rate	−.5
Yield spread	4.9

	Factor Risk Exposures
	Market	Interest Rate	Yield Spread
Stock	(b₁)	(b₂)	(b₃)
P	1.1	−1.9	−.3
P²	1.3	0	.4
P³	.3	.6	.9

Calculate the expected return for each of the stocks shown in the table above. Assume r_f = 4.8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)


Expected return P	%
Expected return P	%
Expected return P³	%

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

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