Consider the multifactorial APT with two factors. The risk premiums of factor 1 and factor 2 portfolios are respectively 5% and 3%. Stock A has a beta of 1.4 at factor 1, and a beta of 0.5 in factor 2. The expected return on stock A is 14%. If there is no arbitration opportunities exist, 

Calculate the risk-free rate of return 

Answer rating: 100% (QA)

To calculate the riskfree rate of return in the context of the multifactorial APT Arbi... View the full answer