Question: Consider the following simplified APT model: Factor Expected Risk Premium (%) Market 6.9 Interest rate 0.4 Yield spread 4.3 Factor Risk Exposures Market Interest Rate

Consider the following simplified APT model:

Factor Expected Risk Premium (%)
Market 6.9
Interest rate 0.4
Yield spread 4.3

Factor Risk Exposures
Market Interest Rate Yield Spread
Stock (b1) (b2) (b3)
P 0.9 1.3 0.3
P2 1.0 0 0.3
P3 0.3 1.4 1.3

Calculate the expected return for each of the stocks shown in the table above. Assume rf = 3.7%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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