Consider the Multifactor APT

question 9

Multiple Choice

Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 6% and 4%, respectively. The risk-free rate of return is 4%. Stock A has an expected return of 16% and a beta on factor-1 of 1.3. Stock A has a beta on factor-2 of

• A) 1.33.
• B) 1.05.
• C) 1.67.
• D) 2.00.

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