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Category > Business & Finance Posted 27 May 2017 My Price 8.00

Multifactor Models:

Multifactor Models: Suppose stock returns can be explained by the following three-factor model:

Assume there is no firm "?ospecific risk. The information for each stock is presented here:

 

 

B1

B2

B3

Risk Premium

Portfolio

Stock A

1.55

.80

.05

6.1%

20%

Stock B

.81

1.25

-.20

5.3%

20%

Stock C

.73

-.14

1.24

5.7%

60%

 

The risk premiums for the factors are 6.1 percent, 5.3 percent, and 5.7 percent, respectively. If you create a portfolio with 20 percent invested in Stock A, 20 percent invested in Stock B, and the remainder in Stock C, what is the expression for the return on your portfolio? If the risk-free rate is 3.2 percent, what is the expected return on your portfolio?

 

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Status NEW Posted 27 May 2017 07:05 PM My Price 8.00

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