A one-factor APT model explains returns in the economy in this question. Suppose the returns to...

 

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A one-factor APT model explains returns in the economy in this question. Suppose the returns to investments in mint-ice-cream production (my favourite ice cream flavour) explain returns in this economy. The risk-free rate is constant over these 3 years at 6% per year. You observe the following annual returns: Year Mint ice-cream returns Pet Rock Manufacturing 1 2 3 16% 14% 17% 15% 13% 16% What is the alpha of Pet Rock Manufacturing? Assume that the alpha, beta and the risk-free rate are constant over these three years and that there is no firm-specific return other than alpha. A one-factor APT model explains returns in the economy in this question. Suppose the returns to investments in mint-ice-cream production (my favourite ice cream flavour) explain returns in this economy. The risk-free rate is constant over these 3 years at 6% per year. You observe the following annual returns: Year Mint ice-cream returns Pet Rock Manufacturing 1 2 3 16% 14% 17% 15% 13% 16% What is the alpha of Pet Rock Manufacturing? Assume that the alpha, beta and the risk-free rate are constant over these three years and that there is no firm-specific return other than alpha.