Suppose stock returns can be explained by the following three-factor model: R i = R F +
Fantastic news! We've Found the answer you've been seeking!
Question:
Suppose stock returns can be explained by the following three-factor model:
Ri = RF + β1F1 + β2F2 − β3F3 |
Assume there is no firm-specific risk. The information for each stock is presented here:
β1 | β2 | β3 | |
---|---|---|---|
Stock A | 2.10 | 1.10 | .85 |
Stock B | .90 | 1.70 | −.30 |
Stock C | .90 | −.47 | 1.56 |
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.) |
The risk premiums for the factors are 7.8 percent, 7 percent, and 7.4 percent, respectively. You create a portfolio with 30 percent invested in Stock A, 30 percent invested in Stock B, and the remainder in Stock C. The risk-free rate is 4.9 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.) |
Related Book For
Posted Date: