Suppose stock returns can be explained by three factor model

Assignment Help Financial Management

Reference no: EM131324432

Suppose stock returns can be explained by the following three-factor model: Ri = RF + β1F1 + β2F2 − β3F3 Assume there is no firm-specific risk. The information for each stock is presented here: β1 β2 β3 Stock A 2.20 1.20 .95 Stock B .94 1.80 −.40 Stock C .92 −.50 1.59 The risk premiums for the factors are 8 percent, 7.2 percent, and 7.6 percent, respectively. You create a portfolio with 30 percent invested in Stock A, 30 percent invested in Stock B, and the remainder in Stock C. What is the expression for the return on your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Factor Beta Factor F1 Factor F2 Factor F3 If the risk-free rate is 5.1 percent, what is the expected return on your portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %

Reference no: EM131324432

Questions Cloud

Differences between populations large enough to make us call : Jerry Coyne proposes a question. At what point are the differences between populations large enough to make us call them different species? please answer question and defend answer.

Determine the intrinsic value of the call : Determine the intrinsic value of the call.- Determine the lower bound of the call.- Determine the time value of the call.

Explain how microevolution can lead to macroevolution : Explain how microevolution can lead to macroevolution. Provide a hypothetical example to illustrate your explanation.

Was the us able to protect its national interests : Despite the region's importance, the United States did not get drawn into a war in the Middle East during the Cold War period (1945-1989). Was the US able to protect its national interests in the region anyway? Explain your answer, using specific ..

Suppose stock returns can be explained by three factor model : Suppose stock returns can be explained by the following three-factor model: Ri = RF + β1F1 + β2F2 − β3F3 Assume there is no firm-specific risk. Factor Beta Factor F1 Factor F2 Factor F3 If the risk-free rate is 5.1 percent, what is the expected retur..

What type of employees are considered a protected class : What type of employees are considered a protected class?Compare and contrast the Affirmative Action law briefly discussed in Chapter 12 on page 276, against two of the U.S. laws aimed to prevent employment discrimination described in Figure 13.1, ..

Manuel of clinical microbiology : Due to the prospect of interplanetary travel, how would you attempt to Isolate and identify a bacterial infection acquired on another planet. This bacteria is unknown to use and does not appear in Bergey's or the Manuel of Clinical Microbiology?

Problem regarding the transgenic organisms : The development of transgenic organisms is an established technique in many laboratories. A transgenic organism is an organism that includes DNA from another organism in the cells of its body. This DNA is not only present, but it is also read by t..

Prepare the journal entry to record bad debt expense : Prepare the journal entry to record bad debt expense assuming Vaughn Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,470 debit balance.

User Account

All Pages