Homework Answers
| a) | Factor risk exposure for the portfolio: | ||||
| Market (b1) = (1.6+1.8+0.3)/3 = | 1.233 | ||||
| Interest rate (b2) = (-1.8+0+0.9)/3 = | -0.300 | ||||
| Yield spread (b3) = (-0.8+0.6+1.0)/3 = | 0.267 | ||||
| b) | Portfolio's expected return = 5+1.233*8.4+(-0.300*-0.5)+0.267*5.5) = | 16.98% | |||
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