Consider a Two-Factor APT Model in Which the First Factor

question 136

Multiple Choice

Consider a two-factor APT model in which the first factor is changes in the 30-year T-bond rate, and the second factor is the percent growth in GNP. Based on historical estimates, you determine that the risk premium for the interest rate factor is 0.02, and the risk premium on the GNP factor is 0.03. For a particular asset, the response coefficient for the interest rate factor is -1.2, and the response coefficient for the GNP factor is 0.80. The rate of return on the zero-beta asset is 0.03. Calculate the expected return for the asset.

• A) 5.0 percent
• B) 2.4 percent
• C) -3.0 percent
• D) -2.4 percent
• E) 3.0 percent

Understand how sales projections affect retained earnings.

Calculate the additional equity financing required based on sales projections and asset/liability adjustments.

Analyze the effect of capacity operation on financial projections.

Calculate the pro forma net income based on projected sales increases.

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Adolescence

The transitional stage of physical and psychological development that occurs between childhood and adulthood.

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The phase of human development during which children mature sexually and become capable of reproduction, marked by physical growth and hormonal changes.

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The process of growth and development, where an individual reaches full biological, emotional, or intellectual potential.

Longitudinal Research

A study design that follows the same subjects over a period of time to observe changes or developments.