What is the risk premium on factor

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Reference no: EM132018949

Consider the multifactor APT with two factors. Stock A has an expected return of 21.70%, a beta of 1.2 on factor 1, and a beta of 0.6 on factor 2. The risk premium on the factor 1 portfolio is 4.00%. The risk-free rate of return is 8.80%.

What is the risk premium on factor 2 if no arbitrage opportunities exist?

Risk-premium ____%

Reference no: EM132018949

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