You are an investor and notice a diversified portfolio. D from the table below. Suppose you...

 

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You are an investor and notice a diversified portfolio. D from the table below. Suppose you use a multifactor APT model and expect D to generate a return of 10.25% during the next year. Using a risk-free rate of 4%, calculate the beta, market risk premium (6%), and CAPM then determine how much arbitrage profit you could generate on a $100,000 position. Time 1 23 3 9 A, % 12 6 -7 13 322 12 12 B, % C, % 6 7 21 -3 -2 9 4 st -2 14 485 18 D, % 12 -5 -2 17 24 14 E. % Market, % 8 7 -10 14 -5 2 21 12 24 15 10 10 You are an investor and notice a diversified portfolio. D from the table below. Suppose you use a multifactor APT model and expect D to generate a return of 10.25% during the next year. Using a risk-free rate of 4%, calculate the beta, market risk premium (6%), and CAPM then determine how much arbitrage profit you could generate on a $100,000 position. Time 1 23 3 9 A, % 12 6 -7 13 322 12 12 B, % C, % 6 7 21 -3 -2 9 4 st -2 14 485 18 D, % 12 -5 -2 17 24 14 E. % Market, % 8 7 -10 14 -5 2 21 12 24 15 10 10

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To calculate the beta of portfolio D calculate the betas of individual factors A B C and E and then weight them by their respective factor loadings in ... View the full answer