suppose a sizeable, fully diversified portoflio has an f1 beta of .9, and f2 beta of 1.4, and an expected return of 11.6 percent. IF f1 turn out to be 1.1 percent and f2 is .-8 percent, what will be the actual rate of return based on a two-factor arbitrage pricing model
actual return = expected return + (f1 beta * f1) + (f2 beta * f2)
actual return = 11.6% + (0.9 * 1.1%) + (1.4 * -0.8%)
actual return = 11.47%
suppose a sizeable, fully diversified portoflio has an f1 beta of .9, and f2 beta of...
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 3%, and all stocks have independent firm-specific components with a standard deviation of 52%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.4 1.8 30 % B 2.4 –0.18 27 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and...
Suppose that well-diversified portfolio Z is priced based on two factors. The beta for the first factor is 1.10 and the beta for the second factor is 0.45. The expected return on the first factor is 11%. The expected return on the second factor is 17%. The risk-free rate of the return is 5.2%. Use the arbitrage pricing theory relationships, what is the expected return on portfolio Z?
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 44%. Portfolios A and B are both well-diversified with the following properties: Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 5%, and all stocks have independent firm- specific components with a standard deviation of 44%. Portfolios A and B are both well-diversified with the following...
13. Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available about two well-diversified portfolios: Portfolio ββ on F1 ββ on F2 Expected Return A 1.0 2.0 19 % B 2.0 0.0 12 % Assuming no arbitrage opportunities exist, the risk premium on the factor F1 portfolio should be?Assuming no arbitrage opportunities exist, the risk premium on the factor F2 portfolio should be?
Suppose that there are two independent economic factors F1 and F2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 45%. The following are well-diversified portfolios: Portfolio Beta on F1 Beta on F2 Expected Return A 1 2 19% B 2 1 24% What is the expected return-beta relationship in this economy?
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 3%, and all stocks have independent firm-specific components with a standard deviation of 42%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.8 2.1 32 % B 2.7 –0.21 27 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and...
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 54%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.6 2.0 32 % B 2.6 –0.20 29 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and...
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 53%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.5 1.9 31 % B 2.5 –0.19 28 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and...
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 43%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.9 2.2 33 % B 2.8 –0.22 28 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and...
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 46%. The following are well-diversified portfolios: Portfolio Beta on F1 Beta on F2 Expected Return A 2.1 2.4 35% B 3.0 –0.24 30% What is the expected return–beta relationship in this economy? (Do not round intermediate calculations. Round your answers to two decimal places. Omit the "%" sign in...