Multiple Choice
Consider the multifactor APT with two factors.The risk premiums on the factor 1 and factor 2 portfolios are 5% and 6%,respectively.Stock A has a beta of 1.2 on factor 1,and a beta of 0.7 on factor 2.The expected return on stock A is 17%.If no arbitrage opportunities exist,the risk-free rate of return is ___________.
A) 6.0%
B) 6.5%
C) 6.8%
D) 7.4%
E) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
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