Suppose the Returns on Security a Are Linearly Related to Four

question 3

Multiple Choice

Suppose the returns on Security A are linearly related to four risk factors: F1,F2,F3,and F4.The required rate of return on Security A can be determined as follows:
.The risk-free rate is 4.5 percent.What is the required rate of return of Security A,where b1,b2,b3,and b4 are 0.4,0.8,0.6,and 0.7,respectively,and F1,F2,F3,and F4 are 5 percent,6 percent,10 percent,and 8 percent,respectively?

• A) 18.40%
• B) 20.60%
• C) 22.90%
• D) 24.30%

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Definitions:

Motives

Internal states or desires that energize and direct behavior towards specific goals.

Expectations

Beliefs or anticipations about the way events, behaviors, or things should be in the future.

Theoretical Diversity

The presence and acceptance of a variety of theories or viewpoints in any field of study, acknowledging that multiple perspectives can contribute to a comprehensive understanding of a topic.

Nature And Nurture

The debate regarding the relative importance of an individual's innate qualities (nature) versus personal experiences (nurture) in determining or causing differences in physical and behavioral traits.