Suppose all stocks obey an APT three-factor model. The risk-free interest rate is 4%. Stock A has a beta of 1 with respect to factor 1, a beta of 1 with respect to factor 2, and a beta of 1 with respect to factor 3. Stock B has a beta of 1 with respect to factor 1, a beta of 2 with respect to factor 2, and a beta of 3 with respect to factor 3. An investor has a portfolio with $8,000 invested in stock A and $2,000 invested in stock B. 

What is the beta on the third risk factor for the investor's portfolio?

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To calculate the beta on the third risk factor for the investors portfolio you nee... View the full answer