Question: 3. Factor Models: You live in a world where asset prices are determined by three factors: The price of oil, the price of lithium, and

3. Factor Models: You live in a world where asset prices are determined by three factors: The price of oil, the price of lithium, and a CAPM-style market factor. Below are the returns on several useful assets: a. 10 points: Using the asset returns above, what are the factor values for each of the three factors? b. 20 points: What would be the expected return on an asset with a market beta of 0.9 , a lithium beta of 1.4, and an oil beta of -.3 ? c. 10 points: Under the APT, what mechanism is responsible for enforcing the security market line
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