Question: Consider the following simplified APT model: Factor Expected Risk Premium (%) Market 6.3 Interest rate 0.7 Yield spread 4.9 Factor Risk Exposures Market Interest Rate

Consider the following simplified APT model:

Factor Expected Risk Premium (%)
Market 6.3
Interest rate 0.7
Yield spread 4.9

Factor Risk Exposures
Market Interest Rate Yield Spread
Stock (b1) (b2) (b3)
P 0.9 1.5 0.2
P2 0.9 0 0.0
P3 0.3 2.0 0.7

Calculate the expected return for each of the stocks shown in the table above. Assume rf = 4.0%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Expected return P: %

Expected return P2: %

Expected return P3: %

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