Consider the following simplified APT model (compare Tables 8 3 and 8 4) Calculate the expected return for the following stocks Assume r f 5 percent Estimated Risk Premium Factor (rtactor r) Yield spread 5 10 Interest rate 61 59 Exchange rate Real GNP 49 Inflation 83 Market 6 36 Expected Risk Premi...

Consider the following simplified APT model (compare Tables 8.3 and 8.4): Calculate the expected return for the

Question:

Consider the following simplified APT model (compare Tables 8.3 and 8.4):

Calculate the expected return for the following stocks. Assume r_f = 5 percent.

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...