An analyst has modeled the stock of Brown Kitchen Supplies using a two factor APT model The risk free rate is 5 , the required return on the first factor (r 1 ) is 10 , and the required return on the second factor (r 2 ) is 15 If b i1 0 5 and b i2 5 1 3, what is Browns required return ...

In the Arbitrage Pricing Theory APT model the required return ...

An analyst has modeled the stock of Brown Kitchen Supplies using a two-factor APT model. The risk-free

Question:

An analyst has modeled the stock of Brown Kitchen Supplies using a two-factor APT model. The risk-free rate is 5%, the required return on the first factor (r₁) is 10%, and the required return on the second factor (r₂) is 15%. If b_i1 = 0.5 and b_i2 = 5 1.3, what is Brown’s required return?

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