Consider the Multifactor APT

question 17

Multiple Choice

Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%, respectively. The risk-free rate of return is 10%. Stock A has an expected return of 19% and a beta on factor 1 of 0.8. Stock A has a beta on factor 2 of

• A) 1.33.
• B) 1.50.
• C) 1.67.
• D) 2.00.

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